How universities helped transform the medieval world..

Davide Cantoni  & Noam Yuchtman have written this paper. The findings are in voxeu:

How does a new form of knowledge enter the public sphere and what are the consequences for economic activity? Today, thousands of students are pursuing university degrees in biotechnologies and computer sciences in order to enter the high-tech labour force or to become entrepreneurs. Do the institutions that train them generate economic growth? What roles can governments play in establishing educational institutions and supporting investments in the new forms of human capital they produce?

The paper looks at a natural experiment:

In our recent work (Cantoni and Yuchtman 2012a), we ask whether the emergence of a new institution of higher education – the university – played a key, causal role in generating the economic development of Europe in the Middle Ages. We also consider the role of new educational content – legal training – in this process.

To identify universities’ causal effect, we exploit a ‘natural experiment’ in university establishment: the Papal Schism of the 14th century. The Schism resulted from the election of two claimants to the title of “Pope”: Urban VI, who resided in Rome and had the support of the Northern Italian states and most of the Holy Roman Empire; and, Clement VII, who resided in Avignon, France, and had the support of the King of France. The split in allegiances led to the expulsion of students and faculty from the Holy Roman Empire who were based in French universities. This was a significant number: there were no universities in the region that is modern Germany prior to the Schism, so students and faculty from Germany often went to France.

The return of German students and faculty resulted in the establishment of three universities within a 6-year time period. Importantly, this dramatically reduced the cost of attending a university for Germans; equally importantly, the timing of the increased access to a university was not a result of any underlying economic change, but due to a political event within the Church.

Findings:

Using data on grants to cities of the right to hold a market – a medieval measure of commercial activity – we test whether market grants increased following the new universities’ establishment in Germany. Indeed, the trend rate of market establishment broke sharply upward just when universities are established. This effect is concentrated in cities experiencing the greatest increase in access to a university; cities experiencing only a small change in distance to a university do not experience big effects on economic activity (see Figures 2 and 3). It is important to note that cities experiencing big changes in distance to a university had trend rates of market establishment similar to those experiencing a small change prior to university establishment. Ex ante differences do not appear to be driving the differential change in trends.¹

Increased access to university training seems to have been associated with increased economic activity. Through what channel did this effect arise? We argue that training in the law was likely crucial. Roman law was a broad, and arguably ‘scientific’ system of legal knowledge that could be used across jurisdictions. It represented a considerable improvement over existing systems of customary law: the latter were often local, not written, based on notions of kinship, honour, or superstition. From the biographies of university graduates of the Middle Ages, we know that Roman legal knowledge was a skill strongly sought after by the rulers of the time. Jurists worked as chancellors, judges, arbitrators, or envoys, thereby modernising bureaucracies, enhancing tax collection, promoting trade, and strengthening state capacity.

Fascinating…

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