International trade and institutional change: Medieval Venice's response to globalization

International trade can have profound effects on domestic institutions. We examine this proposition in the context of medieval Venice circa 800-1600. Early on, the growth of longdistance trade enriched a broad group of merchants who used their newfound economic muscle to push for constraints on the executive i.e., for the end of a de facto hereditary Doge in 1032 and for the establishment of a parliament in 1172. The merchants also pushed for remarkably modern innovations in contracting institutions that facilitated longdistance trade e.g., the colleganza. However, starting in 1297, a small group of particularly wealthy merchants blocked political and economic competition: they made parliamentary participation hereditary and erected barriers to participation in the most lucrative aspects of longdistance trade. Over the next two centuries this led to a fundamental societal shift away from political openness, economic competition and social mobility and towards political closure, extreme inequality and social stratification. We document this ‘oligarchization’ using a unique database on the names of 8,178 parliamentarians and their families’ use of the colleganza in the periods immediately before and after 1297. We then link these families to 6,971 marriages during 1400–1599 in order to document the use of marriage alliances to monopolize the galley trade and the consequent rise of extreme inequality, with those who were powerful before 1297 emerging as the undisputed winners.