Merchant guilds, taxation and social capital

Abstract

We develop a theory of the emergence of merchant guilds as an e¢ cient mechanism to foster cooperation between merchants and rulers, building on the complementarity between merchant guilds' ability to enforce monopoly over trade and their social capital. Unlike existing models, we focus on local merchant guilds, rather than alien guilds, accounting for the main observed features of their behavior, internal organization and relationship with rulers. Our model delivers novel predictions about the emergence, variation, functioning, and eventual decline of this highly successful historical form of network. Our theory reconciles previous explanations and the large body of historical evidence on medieval merchant guilds. In doing so, we also shed novel light on the role of the guilds'social capital, and its importance for taxation, welfare, and the development of towns and their government in medieval Europe.

Feudal bargain in Prague: The rise, spread, and fall of craft guilds

“…This article complements the work of Dessí and Piccolo (2016), who investigate the role of merchant guilds in strengthening rulers’ fiscal capacities in Western Europe. However, merchants were not the only force involved in trading: local craftsmen had at least an equally important role.…”

“…A growing body of literature suggests that occupational guilds played a crucial role in these functions. Guilds were a particularly important source of taxes, loans, and other revenues (Dessí and Piccolo, 2016; Lindberg, 2009; Ogilvie, 2011, 2014, 2019) as well as public services such as administration, market supervision, trade reputation, and even provision of public goods (Caracausi, 2017; Gustafsson, 1987; Hickson and Thompson, 1991; Prak, 2006a, 2006b; Richardson, 2005; Stabel, 2004). Such a system could only work if its obligations and rewards were balanced.…”

“…In exchange for their services, craftsmen bargained with rulers over specific market privileges. A growing literature has identified this feudal bargaining as the driving force in the existence of occupational organizations (Clerici, 2012; De Moor, 2008; Dessí and Piccolo, 2016; Gelderblom, 2013; Greif et al, 1994; Lindberg, 2009, 2010; Mokyr, 2012; Ogilvie, 2004, 2007, 2011, 2014, 2019). 1…”

Alien merchant chambers and enterprise innovation: Evidence from China

“…Grief et al (1994) and Dasgupta and Serageldin (2000) delved into the role of merchant guilds in facilitating commercial growth and trade expansion. Dessí and Piccolo (2016) discovered the significance of local merchant guilds in medieval Europe for taxation and welfare. Existing research on Chinese merchant chambers focuses on the influence of traditional merchant chamber culture, it' was found that traditional merchant guild culture is significantly negatively associated with owner-manager agency costs or real earning management of the enterprise (Du et al, 2019;Wu, 2023), and significantly increases corporate trade credit (Xiu et al, 2023).…”

Voting on Sanctioning Institutions in Open and Closed Communities: Experimental Evidence

“…A priori, it is far from clear whether one should expect individuals to prefer more or less centralized forms of sanctioning institutions when groups' size and composition can vary. 1 A relevant historical example is merchant guilds in Europe (Ogilvie, 2011;Dessi and Piccolo, 2016). We may view the guilds as a type of (relatively) informal, horizontal institution.…”