Political History, Fiscal Compliance and Public Policies: Medieval Social Contracts and Their Legacy

Paolo Buonanno (University of Bergamo)
Matteo Cervellati (University of Bologna)
Sara Lazzaroni (University of Bologna)
Giovanni Prarolo (University of Bologna)

Abstract : We study the long-shadow of local political history for socio-economic outcomes and individual attitudes today. Following evidence on medieval communal and maritime republics, we conceptualize inclusive or exploitative social contracts as resulting from the interplay between the historical incentives of ruling elites and the behavior of the population at large. Tracking the emergence, territorial evolution and disappearance of each sovereign polity in pre-industrial Italy, we provide novel measures of intensity of exposure to different republics over time and the number of changes in the identity of rulers (i.e. political stability) at municipality level. Looking at the intensity of exposure within self-governed polities, we find that a longer rule of communal republics increases fiscal compliance, while the forceful annexation to the rule of the maritime republics and being historically ruled by more polities reduce it. Contribution to public finance go hand-in-hand with actual fiscal policies and is positively associated to measures of generalized morality (organ donations) but crowds-out private mutual help. Exploiting variation in the distribution of surnames in each municipality we show that political history shapes population diversity today in line with different attractiveness of historical legal regulations. Identification strategy also exploits exogenous variation in the exposure to the different polities in the locations forcefully annexed to the rule of the republics in instrumental variable regressions. Findings suggest that historical political instability and selected migration are reinforcing mechanisms of the persistence of multiple types of social contracts until today.

Political Legitimacy and the Institutional Foundations of Constitutional Government: the Case of England

Avner Greif (Stanford University)
Jared Rubin (Chapman University)

Abstract : Although the importance of political legitimacy is well recognized, the social sciences provide no conceptual framework to study its endogenous dynamics and implications. This paper develops a conceptual framework to study endogenous political legitimacy and its impact on political power, institutions, and policies. The paper builds on this framework to construct a context-specific model that facilitates a historical analysis of England's transition to a constitutional monarchy. The analysis highlights the importance of legitimacy and legitimacy-related actions in this transition. It provides a consistent and rational explanation for many historical observations that are unaccounted for by the predominant explanations for this transition.

The Aristotle Tradeoff: the Foundations of Wealth-enhancing Democracy in Ancient Greece

F. Andrew Hanssen (Clemson University)
Robert K. Fleck (Clemson University)

Abstract : In this paper, we outline what we term the “Aristotle tradeoff:” legislated homogeneity in asset ownership (which is costly because it reduces gains from specialization yet beneficial in that it yields better alignment among voters) versus market-driven asset ownership (which generates gains from specialization but yields inferior majoritarian decision-making). In the presence of the tradeoff, the optimal institutional design delivers a second-best result. The ancient Greeks, who designed the first successful democracies and influenced those that followed, understood this tradeoff and, we argue, succeeded because they acted on that understanding. We pursue this argument in a discussion of the political institutions of two of ancient Greece’s most successful city-states (poleis), Athens and Sparta, who responded to the tradeoff in fundamentally different fashions. The discussion illustrates that successful democratic decision making depends on the way voter incentives are affected by the ownership of assets whose value depends on policy decisions. Modern democracies ignore this lesson at their peril.

The Effects of Land Redistribution: Evidence from the French Revolution

Noel Johnson (GMU)
Raphäel Franck (Hebrew University)
Theresa Finley (Susquehannah State)

Abstract : This study exploits the confiscation and auctioning off of Church property that occurred during the French Revolution to assess the role played by transaction costs in delaying the reallocation of property rights in the aftermath of fundamental institutional reform. French districts with a greater proportion of land redistributed during the Revolution experienced higher levels of agricultural productivity in 1841 and 1852 as well as more investment in irrigation and more efficient land use. We trace these increases in productivity to an increase in land inequality associated with the Revolutionary auction process. We also show how the benefits associated with the head-start given to districts with more Church land initially, and thus greater land redistribution by auction during the Revolution, dissipated over the course of the nineteenth century as other districts gradually overcame the transaction costs associated with reallocating the property rights associated with the feudal system.