The Economic and Institutional Determinants of Trade Expansion in Bronze Age Mesopotamia

Abstract

The focus of archaeologists on reconstructing exchange and communication networks in the past resulted in the enormous improvement of methods for analyzing material flows and detecting trade routes. However, our understanding of the determinants of trade patterns over time and space is still limited. To help tackle this issue, we study through regression analysis the rich economic and institutional experience of Bronze Age Mesopotamia. Our testable predictions originate from three main economic theories of trade expansion. First, because of trade costs, mutually beneficial exchanges are discouraged by distance and encouraged by the relative size of markets. Second, trade expands when more suitable farming conditions in neighboring polities allow consumption risk-sharing. Finally, trade develops when interlocking exchange circuits ease the canalization of goods from the outside by providing secure routes, a more certain resolution of legal disputes and credit provision. Ordinary Least Squares—OLS—estimates based on data on 44 major Mesopotamian polities observed for each half-century between 3050 and 1750 BCE are consistent with these predictions. Our approach provides a credible theory-based empirical strategy for integrating archaeological, environmental, and historical data and calls for a tighter interdisciplinary cooperation.