Institutions for contract enforcement and risk-sharing: From the sea loan to the commenda in late medieval Venice
My dissertation uses historical records and a context-specific mechanism-design model to investigate the institutional and contractual arrangements that facilitated long-distance trade in late medieval Venice.This dissertation was awarded by the Department of Economics at the European University Institute under the inspiring supervision of Professors Avner Greif and Ramon Marimon with support from the Social Science History Institute at Stanford University. I also wish to thank Andrea Drago, Gavin Wright, Jaime Reis, and Leandro Prados de la Escosura for their help in various ways. The mobilisation of capital and the sharing of risk in long-distance trade could potentially promote economic prosperity, but it required that merchants were able to commit ex-ante not to breach their financial contracts ex-post. Financial contracting entails the exchange of tangible funds for the promise of future payments, but promises can be broken. Therefore, the set of financial relations that actually transpire in a society depends on the society s institutions for contract enforcement, meaning the constraints that ensure compliance with the promised future payments.Institutions are viewed as constraints that enable merchants to commit. For a definition of institutions, see Greif (forthcoming) and North (1990). Distinct institutional arrangements enforce different sets of contractual forms, among which particular ones can be chosen. The selection of various contracts, and their underlying institutional foundations, has significant efficiency effects. The dissertation thus integrates a historical institutional analysis of the emergence and transition of various contracts with the study of their efficiency attributes. This approach enables me to address the following questions: What institutions for contract enforcement enabled the Venetians to commit to the sea loan (a debt-like contract) and the commenda (an equity-like contract)? What caused the transition from the former to the latter? Did the Venetians attain an efficient allocation of risk?
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