Hostname: page-component-cd9895bd7-8ctnn Total loading time: 0 Render date: 2025-01-03T21:19:58.715Z Has data issue: false hasContentIssue false
  • English
  • Français

Cities, Constitutions, and Sovereign Borrowing in Europe, 1274–1785

Published online by Cambridge University Press:  26 July 2007

David Stasavage
David Stasavage
Affiliation:
New York University, [email protected]
Get access

Abstract

This article investigates the politics of sovereign borrowing in Europe over the very long run. I consider three alternative hypotheses regarding the sources of borrower credibility. According to the first, European states with constitutional checks on executive authority found it easier to obtain credit at low interest rates than did states that lacked such constraints. My second hypothesis focuses on state type (city-state versus territorial state) and the way in which this may have influenced the balance of political power between owners of land and owners of capital in a society. This hypothesis suggests that after controlling for other factors, one should observe that city-states in Europe found it easier to borrow than did larger territorial states, and that these city-states paid lower interest rates on their debt. Finally, my third hypothesis suggests that borrower credibility depended on the simultaneous presence of both constitutional checks and balances and a city-state. When one considers a broad sample of cases over a long time span there is strong support for the proposition involving city-states and merchant power, but less support for the argument that constitutional checks influenced credibility regardless of state type (city-state or territorial state). There is, however, some empirical evidence of an interaction effect whereby constitutional constraints on rulers made city-states particularly credible as borrowers. My results are robust to a number of controls for alternative determinants, for sample selection bias, and for the endogeneity of city-state development.I would like to thank Robert Fannion, Jeff Frieden, Peter Gourevitch, Lisa Martin, Adam Przeworski, Ronald Rogowski, Jean-Laurent Rosenthal, Ken Scheve, Mike Tomz, Nikki Velasco, two anonymous referees, and seminar participants at Stanford and UCLA for comments on a previous draft. This research was supported by the Economic and Social Research Council (UK).

Type
Research Article
Information
International Organization , Volume 61 , Issue 3 , July 2007 , pp. 489 - 525
Copyright
© 2007 The IO Foundation

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Acemoglu, Daron, Simon Johnson, and James Robinson. 2002. The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth. NBER Working Paper 8831. Cambridge, Mass: National Bureau of Economics Research.
Acemoglu, Daron, Simon Johnson, and James Robinson. 2005. The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth. American Economic Review 95 (3):546–79.Google Scholar
Airlie, Stuart. 1998. Private Bodies and the Body Politic in the Divorce Case of Lothar II. Past and Present 161 (Nov.):3–38.Google Scholar
Bairoch, Paul, Jean Batou, and Pierre Chèvre. 1988. The Population of European Cities, 800–1850: Data Bank and Short Summary of Results. Geneva: Librairie Droz.
Banerjee, Abhijit, and Lakshmi Iyer. 2005. History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India. American Economic Review 95 (4):1190–213.Google Scholar
Barraclough, Geoffrey. 1946. The Origins of Modern Germany. Oxford, England: Basil Blackwell.
Brady, Thomas A., Jr. 1991. The Rise of Merchant Empires, 1400–1700: A European Counterpoint. In The Political Economy of Merchant Empires: State Power and World Trade, 1350–1750, edited by James D. Tracy, 117–60. New York: Cambridge University Press.
Braumoeller, Bear F. 2004. Hypothesis Testing and Multiplicative Interaction Terms. International Organization 58 (4):807–20.Google Scholar
Clark, Gregory. 1996. The Political Foundations of Modern Economic Growth, England 1540–1800. Journal of Interdisciplinary History 26 (4):563–88.Google Scholar
DeLong, J. Bradford, and Andrei Shleifer. 1993. Princes and Merchants: European City Growth before the Industrial Revolution. Journal of Law and Economics 36 (2):671–702.Google Scholar
de Planhol, Xavier. 1994. An Historical Geography of France. New York: Cambridge University Press.
Downing, Brian M. 1992. The Military Revolution and Political Change: Origins of Democracy and Autocracy in Early Modern Europe. Princeton, N.J.: Princeton University Press.
Eaton, Jonathan, and Mark Gersovitz. 1981. Debt with Potential Repudiation: Theoretical and Empirical Analysis. Review of Economic Studies 48 (2):289–309.Google Scholar
Eichengreen, Barry, and Ashoka Mody. 2004. Do Collective Action Clauses Raise Borrowing Costs? The Economic Journal 114 (495):247–64.Google Scholar
Epstein, Stephan R. 2000. Freedom and Growth: The Rise of States and Markets in Europe, 1300–1750. London: Routledge.
Epstein, Stephan R. 2004. States: Public Goods and the Formation and Integration of Markets. Unpublished manuscript, London School of Economics, London.
Epstein, Steven A. 1996. Genoa and the Genoese, 958–1528. Chapel Hill: University of North Carolina Press.
Ertman, Thomas. 1997. Birth of the Leviathan: Building States and Regimes in Medieval and Early Modern Europe. New York: Cambridge University Press.
Fried, Johannes. 1995. The Frankish Kingdoms, 817–911: The East and Middle Kingdoms. In The New Cambridge Medieval History: Vol. II c.700–900, edited by Rosamond McKitterick, 142–68. Cambridge: Cambridge University Press.
Fryde, E. B., and Matthew M. Fryde. 1963. Public Credit With Special Reference to North-Western Europe. In The Cambridge Economic History of Europe, edited by M. M. Postan, Edwing Eearnest Rich, and Edward Miller, 430–53. Cambridge: Cambridge University Press.
Fryde, Matthew M. 1964. Studies in the History of Public Credit of German Principalities and Towns in the Middle Ages. Studies in Medieval and Renaissance History 1:221–92.Google Scholar
Ghosh, Parikshit, Dilip Mookherjee, and Debraj Ray. 2000. Credit Rationing in Developing Countries: An Overview of the Theory. In A Reader in Development Economics, edited by Dilip Mookherjee and Debraj Ray, 383–401. London: Basil Blackwell.
Gilomen, Hans-Jorg. 2003. La Prise de Décision en Matière d'Emprunts dans les Villes Suisses au 15e Siècle. In Urban Public Debts: Urban Government and the Market for Annuities in Western Europe (14th–18th centuries), edited by Marc Boone, Karel Davids, and Paul Janssens, 127–48. Turnhout, Belgium: Brepols.
Graves, Michael A. R. 2001. The Parliaments of Early Modern Europe. London: Longman.
Greif, Avner. 2006. Institutions and the Path to the Modern Economy: Lessons from Medieval Trade. Cambridge: Cambridge University Press.
Heckman, James J. 1979. Sample Selection Bias as a Specification Error. Econometrica 47 (1):153–61.Google Scholar
Hoffman, Philip T. 2005. Why Is It That Europeans Ended Up Conquering the Rest of the Globe? Prices, the Military Revolution, and Western Europe's Comparative Advantage in Violence. Unpublished manuscript, California Institute of Technology, Pasadena.
Hoffman, Philip T., Gilles Postel-Vinay, and Jean-Laurent Rosenthal. 2000. Priceless Markets: The Political Economy of Credit in Paris, 1660–1879. Chicago: University of Chicago Press.
Hoffman, Philip T., and Jean-Laurent Rosenthal. 1997. The Political Economy of Warfare and Taxation in Early Modern Europe: Historical Lessons for Economic Development. In The Frontiers of the New Institutional Economics, edited by John N. Drobak and John V. C. Nye, 213–46. London: Academic Press.
Hoffman, Philip T., and Kathryn Norberg, eds. 1994. Fiscal Crises, Liberty, and Representative Government, 1450–1789. Stanford, Calif.: Stanford University Press.
Homer, Sidney, and Richard Sylla. 1996. A History of Interest Rates. 3d ed. New Brunswick, N.J.: Rutgers University Press.
Israel, Jonathan Irvine. 1995. The Dutch Republic: Its Rise, Greatness, and Fall, 1477–1806. Oxford, England: Oxford University Press.
Kohn, Meir. 2005. Government Finance in Pre-Industrial Europe. Unpublished manuscript, Dartmouth College, Hanover, N.H.
Lachmann, Richard. 2003. Elite Self-Interest and Economic Decline in Early Modern Europe. American Sociological Review 68 (3):346–72.Google Scholar
Lane, Frederic C. 1973. Venice: A Maritime Republic. Baltimore: Johns Hopkins University Press.
Lopez, Robert S. 1976. The Commercial Revolution of the Middle Ages, 950–1350. New York: Cambridge University Press.
Major, J. Russell. 1960. Representative Institutions in Renaissance France, 1421–1559. Madison: University of Wisconsin Press.
Neal, Larry. 1990. The Rise of Financial Capitalism: International Capital Markets in the Age of Reason. New York: Cambridge University Press.
Nelson, Janet. 1997. The Frankish Kingdoms, 814–898: The West. In The New Cambridge Medieval History. Vol. II: C. 700–900, edited by Rosamond McKitterick, 110–41. Cambridge: Cambridge University Press.
North, Douglass C., and Robert Paul Thomas. 1973. The Rise of the Western World: A New Economic History. Cambridge: Cambridge University Press.
North, Douglass C., and Barry R. Weingast. 1989. Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth Century England. Journal of Economic History 49 (4):803–32.Google Scholar
O'Brien, Patrick K. 2001. Fiscal Exceptionalism: Great Britain and its European Rivals: From Civil War to Triumph at Trafalgar and Waterloo. Working Paper 65/01. London: Department of Economic History, London School of Economics.
Parker, Geoffrey. 1988. The Military Revolution: Military Innovation and the Rise of the West, 1500–1800. Cambridge: Cambridge University Press.
Pezzolo, Luciano. 2003. Italian Monti: The Origins of Bonds and Government Debt. Paper presented at the Yale School of Management Conference on the History of Financial Innovation, March, New Haven, Conn.
Pezzolo, Luciano. 2004. Fiscal System and Finance in Northern Italy in the Early Modern Age. Unpublished manuscript, Università Ca' Foscari, Venice.
Pezzolo, Luciano. 2005. Bonds and Government Debt in Italian City-States, 1250–1650. In The Origins of Value: The Financial Innovations that Created Modern Capital Markets, edited by William N. Goetzmann and K. Geert Rouwenhorst, 145–64. New York: Oxford University Press.
Pirenne, Henri. 1910. Les Anciennes Démocraties des Pays-Bas. Paris: Flammarion.
Pirenne, Henri. 1925. Medieval Cities: Their Origins and the Revival of Trade. Princeton, N.J.: Princeton University Press.
Posner, Daniel N. 2004. The Political Salience of Cultural Difference: Why Chewas and Tumbukas Are Allies in Zambia and Adversaries in Malawi. American Political Science Review 98 (4):529–45.Google Scholar
Poynder, Nicholas. 1999. Grain Storage in Theory and History. Paper presented at the 3d Conference of the European Historical Economics Society, October, Lisbon.
Robinson, James A. 1998. Debt Repudiation and Risk Premia: The North-Weingast Thesis Revisited. Unpublished manuscript, Harvard University, Cambridge, Mass.
Schultz, Kenneth A., and Barry R. Weingast. 2003. The Democratic Advantage: Institutional Foundations of Financial Power in International Competition. International Organization 57 (1):3–42.Google Scholar
Sharma, Vivek. 2005. The Impact of Institutions on Conflict and Cooperation in Early Modern Europe. Ph.D. diss., New York University, New York.
Spruyt, Hendrik. 1994. The Sovereign State and Its Competitors: An Analysis of Systems Change. Princeton, N.J.: Princeton University Press.
Stasavage, David. 2003. Public Debt and the Birth of the Democratic State: France and Great Britain, 1688–1789. Cambridge: Cambridge University Press.
Stasavage, David. 2007. Partisan Politics and Public Debt: The Importance of the Whig Supremacy for Britain's Financial Revolution. European Review of Economic History 11 (1):123–53.Google Scholar
Summerhill, William R. 2004. Inglorious Revolution: Sovereign Debt, Tropical Credibility, and Financial Underdevelopment in Imperial Brazil. Unpublished manuscript, University of California, Los Angeles.
Sussman, Nathan, and Yishay Yafeh. 2006. Constitutions and Commitment: Evidence on the Relation Between Institutions and the Cost of Capital. Journal of Economic History 66 (4):906–935.Google Scholar
t'Hart, Marjolein. 1999. The United Provinces, 1579–1806. In The Rise of the Fiscal State in Europe: c. 1200–1815, edited by Richard Bonney, 309–26. Oxford, England: Oxford University Press.
Tilly, Charles. 1990. Coercion, Capital, and European States, AD 990–1992. Oxford, England: Basil Blackwell.
Tomz, Michael. Forthcoming. Sovereign Debt and International Cooperation: Reputational Reasons for Lending and Repayment. Princeton, N.J.: Princeton University Press.
Tracy, James D. 1985. A Financial Revolution in the Habsburg Netherlands: Renten and Renteniers in the County of Holland, 1515–1565. Berkeley: University of California Press.
Tracy, James D. 1994. Taxation and State Debt. In Handbook of European History 1400–1600, Late Middle Ages, Renaissance and Reformation. Vol. IV, Structures and Assertions, edited by Thomas A. Brady, Heiko A. Oberman, and James D. Tracy, 563–88. Leiden, Netherlands: Brill.
Velde, François, and David Weir. 1992. The Financial Market and Government Debt Policy in France: 1746–1793. Journal of Economic History 52 (1):1–39.Google Scholar
Waley, Daniel. 1989. The Italian City-Republics. New York: Longman.
Weingast, Barry R. 1997. The Political Foundations of Limited Government: Parliament and Sovereign Debt in 17th- and 18th-Century England. In Frontiers of the New Institutional Economics, edited by John N. Drobak and John V. C. Nye, 213–46. London: Harcourt Brace.
Wolfe, Martin. 1972. The Fiscal System of Renaissance France. New Haven, Conn.: Yale University Press.