Political Change and Economic Development. Evidence from the Rise of Participative Political Institutions in the Late Medieval German Lands

Abstract

This study investigates the effect of the rise of participative political institutions - i.e, institutions in which groups of citizens previously excluded from political life participated in the political process - in late medieval central European cities on city development. The results show, that the enlargement of political participation is not always conducive to city development. The participation of guilds in the city council, for example had an overall neutral or negative effect (depending on the importance of the guilds). Furthermore, the effect of guild participation is declining over time, implying that this form of PPI is prone to institutional degeneration and increased rent-seeking. Election of city government by the citizens, in contrast, shows a stable and robustly positive effect on city development. Hence, the decisive point for more political participation being conducive for economic development is that the increase in participation is accompanied by increased accountability of the politicians and a politic that is oriented toward public welfare than the special interests of particular groups.