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Two is Company, N is a Crowd? Merchant Guilds and Social Capital

Roberta Dessi and Salvatore Piccolo ()

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We develop a theory of the emergence of merchant guilds as an efficient mechanism to implement collusion among merchants and rulers, building on the natural complementarity between merchants’ market trading and mutual monitoring. Unlike the seminal paper in the existing literature, we focus primarily on the far more numerous local merchant guilds, rather than alien guilds, accounting for the main observed features of their behavior, their internal organization, and their relationship with rulers. Our model delivers novel predictions about guild size, membership restrictions, and their welfare implications. It also identifies the main channels through which the guilds’ social capital influenced their ability to collude effectively with rulers. As we show, the available historical evidence offers ample support for our theory, shedding new light on the role of the guilds’ social capital. We then analyze the key trade-offs faced by rulers in choosing whether to grant recognition to one or multiple guilds. This helps us to understand the observed distribution of guilds, and provides a rationale for the establishment of both local and alien merchant guilds.

Keywords: merchant guild; social capital; collusion; political economy; trade; taxation (search for similar items in EconPapers)
Date: 2008-09-01, Revised 2009-07-12
New Economics Papers: this item is included in nep-soc
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Related works:
Working Paper: Two is Company, N is a Crowd? Merchant Guilds and Social Capital (2013) Downloads
Working Paper: Two is Company, N is a Crowd? Merchant Guilds and Social Capital (2013) Downloads
Working Paper: Two is Company, N is a Crowd? Merchant Guilds and Social Capital (2009) Downloads
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