Do Universities Matter?

Chris Colvin has a nice post over at the NEP-HIS Blog on Cantoni and Yuchtman's recent NBER working paper entitled "Medieval Universities, Legal Institutions, and the Commercial Revolution".  In this paper, the authors basically argue that the establishment of universities after 1386 in Germany following the Papal Schism resulted in well-trained law students.  These graduates helped to develop the legal institutions which allowed trade and markets to flourish in Germany.  The authors find that market establishment was greater the closer the town/city was to one of the newly-established universities.  However, rather than providing evidence in support of a university-matters thesis, this paper maybe provides more evidence in support of a law-matters thesis.       

Here is the paper's abstract:
We present new data documenting medieval Europe's "Commercial Revolution'' using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany's first universities after 1386 following the Papal Schism. We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most.  There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are not affected by excluding cities close to universities or cities belonging to territories that included universities.  Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity.

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