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The secret of Venetian success: a public-order, reputation-based institution

Published online by Cambridge University Press:  01 December 2008

YADIRA GONZÁLEZ DE LARA*
Affiliation:
University of Alicante, Department of Economic Analysis, Campus San Vicente del Raspeig, Alicante E03080, Spain, yadira@merlin.fae.ua.es
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Abstract

This article examines the institutional foundations of the financial market underpinning Venice's commercial success during the late medieval period. A public-order, reputation-based institution enabled merchants to commit (i) not to flee with investors' capital, despite the limited geographical reach of the legal system, and (ii) not to breach their contracts, despite the investors' inability to directly monitor them. Economic rents in Venice motivated merchants to submit to the city's authorities, while tight administrative trading controls provided the information required to verify a contractual breach. These institutional arrangements differed from other public-order and reputation-based institutions that have been considered in the literature.

Type
Research Article
Copyright
Copyright © European Historical Economics Society 2008

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