DP14214 Political History, Fiscal Compliance and Cooperation: Medieval Social Contracts and their Legacy

Author(s): Paolo Buonanno, Matteo Cervellati, Sara Lazzaroni, Giovanni Prarolo
Publication Date: December 2019
Keyword(s): Fiscal Compliance, Medieval Republics, population diversity, Social Contracts
Programme Areas: Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14214

We study the long-shadow of local political history for socio-economic outcomes and attitudes today. Following historical evidence on medieval communal and maritime republics, we conceptualize more inclusive and exploitative social contracts as resulting from the interplay between the different incentives of ruling elites and the behavior of the population at large. Tracking the emergence, territorial evolution and disappearance of each polity in pre-industrial Italy, we measure the intensity of exposure to different republics over time and the number of changes in the identity of rulers (i.e. political stability) in each municipality. Looking within territories ever ruled by the republics, we find that a longer exposure to communal polities increases fiscal compliance, while the forceful annexation to the rule of maritime republics and higher political instability reduce it. Contribution to public goods go hand-in-hand with fiscal policies and is positively associated to generalized morality (organ donations) but crowds-out private mutual help. Political history also shapes population diversity today in line with evidence on differently attractive historical legal regulations. The results are robust to extensive checks and are confirmed using local variation in distance to centers of power and to the changing network of polities in instrumental variable regressions. Findings suggest that historical political instability and selected migration are reinforcing mechanisms of historical persistence of multiple social contracts until today.