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

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.