Class differences and the Commercial Revolution: An equilibrium selection story

Maurizio Iacopetta

Economic Modelling, 2021, vol. 100, issue C

Abstract: The reopening of the Mediterranean routes in the tenth century sparked, in some regions of Europe, a long period of economic boom. It also triggered a social change whereby some members of the nobility, despite their social status, turned to commerce. I explain these events through the lens a Kiyotaki and Wright (1989) model, extended to a two-country world. The response of the elite to a communication shock causes the economy to transit from a low-to a high-production equilibrium, if pre-existing class differences are not too large. Quantitative experiments illustrate the view of economic historians that medieval expansion ensued in regions where the elite enjoyed relatively modest privileges and was slow in places, most notably France, where the elite's preoccupation for preserving the social-status was strong.

Keywords: Equilibrium selection; Trade; Search (search for similar items in EconPapers)
JEL-codes: C73 D83 O11 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:100:y:2021:i:c:s0264999321000973

DOI: 10.1016/j.econmod.2021.105508

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