European City-States and Economic Growth

A long tradition claims that one factor that distinguished western Europe from China, the Middle East, and Russia was the presence of independent city-states.  Max Weber, Henri Pirenne, and John Hicks argued that city-states played a crucial role in beginning the long road to modern economic growth (see this earlier MR post on producer and consumer cities).

De Long and Shleifer (1993) argued that city-states ruled by merchants favored policies that protected property rights and markets and that they imposed lower taxes than princely states did. But historians have found that cities like Florence actually imposed much higher taxes than feudal states did (see Epstein 1991, Epstein 1993 [JSTOR links], or Epstein 2000). Until now, however, no-one (to the best of my knowledge) has provided systematic evidence on the economic performance of independent city-states across Europe. A new paper by David Stasavage attempts to do just this. Using city population as a proxy for economic development, he finds that  autonomous city-states overall didn’t grow faster than other cities. Interestingly, new city-states which had been independent for less than 200 years did grow faster.  After more than 200 years of independence, growth in these independent cities slowed and they grew more slowly than did ordinary cities.

Stasavage interprets this finding in terms of a model of oligarchies proposed by Acemoglu (2008). Oligarchies initially have an incentive to impose institutions that favor markets and economic growth. However, oligarchies also impose barriers to entry, and over time these barriers to entry lead to growth slowing down.  Other (complementary) mechanisms may also have been at work. In particular, Stasavage does not consider the role of external warfare. Once they became rich and prosperous, city-states were often attacked by neighboring territorial states. Many city-states then had to impose high taxes and other extractive policies in order to survive. In any case, these findings are significant for an argument that I will evaluate in subsequent posts that claims that the rise of state capacity played an important role in getting growth going in early modern Europe.


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