Wealth Accumulation and Institutional Capture: the Rise of the Medici and the Fall of the Florentine Republic

Marianna Belloc (Sapienza University of Rome)
Francesco Drago (University of Catania)
Mattia Fochesato (Bocconi University)
Roberto Galbiati (CNRS-SciencesPo)

Abstract : We study mechanisms and consequences of institutional capture using novel hand-collected data from the Florentine Republic. In the 14th-15th centuries, political offices were assigned in Florence by a system combining elections and lottery, which ensured for several decades a substantial alternation of power. During the 1420s, after a fiscal crisis, the Medici family became the first lender of the Republic, acquired a leading position in the city, and de facto captured the office allocation mechanism, while leaving the political institutions formally unchanged. Employing individual level information on wealth, political participation, and party affiliation, we document how the Medici manipulated office assignment and show that, under their regime, participation into politics predicted individual wealth. By comparing results for the periods before and after the institutional capture and using complementary data sources on voluntary loans to the Republic, we provide several pieces of evidence that explain our findings in terms of patronage and rent-extraction.


Colonial Origins, Property Rights, and the Organization of Agricultural Production: the Us Midwest and Argentine Pampas Compared

Eric C. Edwards (North Carolina State University)
Martin Fiszbein (Boston University)
Gary D. Libecap (University of California, Santa Barbara)

Abstract : We examine the origins, persistence, and economic consequences of institutional structures of agricultural production. We compare farms in the Argentine Pampas and US Midwest, regions of similar potential input and output mixes. The focus is on 1910-1914, during the international grain trade boom and when census data are available. The Midwest was characterized by small farms and family labor. Land was a commercial asset and traded routinely. The Pampas was characterized by large landholdings and use of external labor. Land was a source of status and held across generations. Status attributes could not be easily monetized for trade, reducing market exchange, limiting entry, and hindering farm restructuring. Differing land property rights followed from English and Spanish colonial and post-independence policies. Geo-climatic factors cannot explain dissimilarities in farm sizes, tenancy, and output mixes, suggesting institutional constraints. Midwest farmers also were more responsive to exogenous signals. There is evidence of moral hazard on Pampas farms. Conjectures on long-term development are provided.


Civil Service Reform and Organizational Practices: Evidence from the Pendleton Act

Diana Moreira (University of California, Davis)
Santiago Perez (University of California, Davis)

Abstract : Competitive exams are a standard method for selecting civil servants. Yet, evidence on the effectiveness of such approach is mixed, and lack of personnel data limits our understanding of the mechanisms underlying this varying success. We digitize personnel and financial data to study the impacts of the 1883 Pendleton Act, which mandated exams for some employees in the largest US customs-collection districts. The reform improved targeted employees’ professional background and reduced turnover. However, it did not increase cost-effectiveness in revenue collection. An unintended consequence of the reform was to induce hiring in exempted positions, provoking distortions in districts’ personnel structure. Our results illustrate the importance of considering the incentives of all involved parties when designing reforms.