Financing Long-Distance Trade: The Joint Liability Rule and Bills of Exchange in Eighteenth-Century France

Veronica Aoki Santarosa

The Journal of Economic History, 2015, vol. 75, issue 3, 690-719

Abstract: Over time, international trade expanded beyond the reach of an individual's personal networks. How was long-distance trade among strangers financed without using banks? I argue that the joint liability rule enabled the medieval bill of exchange to become a major form of payment and credit in the early modern period which in turn supported an unparalleled expansion of trade. This article empirically examines the role that joint liability played in ameliorating fundamental information problems in long-distance trade finance.

Date: 2015
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