Medieval Universities, Legal Institutions, and the Commercial Revolution

We present new data documenting medieval Europe’s Commercial Revolution” using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany’s first universities after 1386 following the Papal Schism. We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most. There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are not affected by excluding cities close to universities or cities belonging to territories that included universities. Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity

Educational Content, Educational Institutions and Economic Development: Lessons from History

Individuals’ choices of educational content are often shaped by the political economy of government policies that determine the incentives to acquire various skills. We first present a model to show how differences in educational content emerge as an equilibrium outcome of private decisions and government policy choices. We then illustrate these dynamics in two historical circumstances. In medieval Europe, states and the Church found individuals trained in Roman law valuable, and eventually supported investments in this new form of human capital. This had positive effects on Europe’s commercial and institutional development. In late 19th-century China, elites were afraid of the introduction of Western science and engineering and continued to select civil servants - who enjoyed substantial rents—based on their knowledge of Confucian classics. As a result, China lacked skills useful in modern industry. Finally, we present a variety of other contemporary and historical applications of this theory

Educational Content, Educational Institutions and Economic Development: Lessons from History

Individuals’ choices of educational content are often shaped by the political economy of government policies that determine the incentives to acquire various skills. We first present a model to show how differences in educational content emerge as an equilibrium outcome of private decisions and government policy choices. We then illustrate these dynamics in two historical circumstances. In medieval Europe, states and the Church found individuals trained in Roman law valuable, and eventually supported investments in this new form of human capital. This had positive effects on Europe’s commercial and institutional development. In late 19th-century China, elites were afraid of the introduction of Western science and engineering and continued to select civil servants - who enjoyed substantial rents—based on their knowledge of Confucian classics. As a result, China lacked skills useful in modern industry. Finally, we present a variety of other contemporary and historical applications of this theory.Educational Content; Educational Institutions; Political Economy; Development

Coercive Contract Enforcement: Law and the Labor Market in 19th Century Industrial Britain

British Master and Servant law made employee contract breach a criminal offense until 1875. We develop a contracting model generating equilibrium contract breach and prosecutions, then exploit exogenous changes in output prices to examine the effects of labor demand shocks on prosecutions. Positive shocks in the textile, iron, and coal industries increased prosecutions. Following the abolition of criminal sanctions, wages differentially rose in counties that had experienced more prosecutions, and wages responded more to labor demand shocks. Coercive contract enforcement was applied in industrial Britain; restricted mobility allowed workers to commit to risk-sharing contracts with lower, but less volatile, wages.

Teaching to the tests: an economic analysis of traditional and modern education in late imperial and republican China

A traditional education system, based on the Confucian classics, was a pillar of imperial China's social structure for centuries, preparing elites for a series of highly competitive exams conferring gentry status and civil service positions. Reformers in late imperial China called for the modernization of educational institutions, seeing in Western education the skills necessary to develop China's economy. In the late 19th century, the traditional education system was joined by a “modern”, Western track, which offered teaching in science, math, social science, law, and engineering. In this paper, early 20th century employee records from the Tianjin-Pukou Railroad are analyzed to identify differences in labor market outcomes associated with study in the traditional and modern educational systems. The employee records reveal that modern and traditional education were both associated with wage premiums, but that these were significantly larger for individuals trained at high levels in the modern system, especially those trained in engineering. Individuals trained in the traditional system worked disproportionately in the clerical department of the railroad, while those with modern education were more often in managerial and technical roles. Qualitative and quantitative evidence suggests that these results are not driven by sorting into educational institutions according to ability. These findings indicate that beyond years of schooling, the content of schooling can play an important role in the process of economic development

Crime, punishment, and politics: an analysis of political cycles in criminal sentencing

We present evidence that Washington State judges respond to political pressure by sentencing serious crimes more severely. Sentences are around 10% longer at the end of a judge's political cycle than at the beginning; judges' discretionary departures above the sentencing guidelines range increase by 50% across the electoral cycle, accounting for much of the greater severity. Robustness specifications, nonlinear models, and falsification exercises allow us to distinguish among explanations for increased sentencing severity at the end of judges' political cycles. Our findings inform debates over judicial elections, and highlight the interaction between judicial discretion and the influence of judicial elections

Data-intensive innovation and the State: evidence from AI firms in China

Artificial intelligence (AI) innovation is data-intensive. States have historically collected large amounts of data, which is now being used by AI firms. Gathering comprehensive information on firms and government procurement contracts in China’s facial recognition AI industry, we first study how government data shapes AI innovation. We find evidence of a precise mechanism: because data is sharable across uses, economies of scope arise. Firms awarded public security AI contracts providing access to more government data produce more software for both government and commercial purposes. In a directed technical change model incorporating this mechanism, we then study the trade-offs presented by states’ AI procurement and data pro-vision policies. Surveillance states’ demand for AI may incidentally promote growth, but distort innovation, crowd-out resources, and infringe on civil liberties. Government data provision may be justified when economies of scope are strong and citizens’ privacy concerns are limited

Labor market institutions in the gilded age of American economic history

This chapter argues that although nineteenth-century labor markets were unencumbered by regulatory legislation, there existed frictions and rents in the labor market; moreover, labor market institutions other than legislation played an active role in determining labor market outcomes. The chapter provides evidence of frictions and firm-specific rents in nineteenth-century urban American labor markets: when firms experienced positive output price shocks, their employees earned wage premia relative to other employees with similar skills in the same labor market. The existence of rents in the labor contract suggests a role for bargaining and conflict between employees and employers. Workers in the late nineteenth century went on strike to increase wages. This chapter presents data on the frequency of strikes in the nineteenth century and suggestive evidence of an association between strikes and wages; finally, it documents the rise of judicial labor injunctions aimed at suppressing strikes

Reallocation and secularization: the economic consequences of the Protestant Reformation

The Protestant Reformation, beginning in 1517, was both a shock to the market for religion and a first-order economic shock. We study its impact on the allocation of resources between the religious and secular sectors in Germany, collecting data on the allocation of human and physical capital. While Protestant reformers aimed to elevate the role of religion, we find that the Reformation produced rapid economic secularization. The interaction between religious competition and political economy explains the shift in investments in human and fixed capital away from the religious sector. Large numbers of monasteries were expropriated during the Reformation, particularly in Protestant regions. This transfer of resources shifted the demand for labor between religious and secular sectors: graduates from Protestant universities increasingly entered secular occupations. Consistent with forward-looking behavior, students at Protestant universities shifted from the study of theology toward secular degrees. The appropriation of resources by secular rulers is also reflected in construction: during the Reformation, religious construction declined, particularly in Protestant regions, while secular construction increased, especially for administrative purposes. Reallocation was not driven by pre-existing economic or cultural differences

Coercive contract enforcement: law and the labor market in nineteenth century industrial Britain

British Master and Servant law made employee contract breach a criminal offense until 1875. We develop a contracting model generating equilibrium contract breach and prosecutions, then exploit exogenous changes in output prices to examine the effects of labor demand shocks on prosecutions. Positive shocks in the textile, iron, and coal industries increased prosecutions. Following the abolition of criminal sanctions, wages differentially rose in counties that had experienced more prosecutions, and wages responded more to labor demand shocks. Coercive contract enforcement was applied in industrial Britain; restricted mobility allowed workers to commit to risk-sharing contracts with lower, but less volatile, wages