DP6981 Long Term Persistence

Author(s): Luigi Guiso , Paola Sapienza , Luigi Zingales

Publication Date: October 2008

Keyword(s): social capital , culture , persistence , institutions , economic development

JEL(s): O10 , O43 , P16

Programme Areas: Development Economics , Financial Economics

Link to this Page: www.cepr.org/pubs/dps/DP6981.asp.asp

Is social capital long lasting? Does it affect long term economic performance? To answer these questions we test Putnam’s conjecture that today marked differences in social capital between the North and South of Italy were due to the culture of independence fostered by the free city-states experience in the North of Italy at the turn of the first millennium. We show that the medieval experience of independence has an impact on social capital within the North, even when we instrument for the probability of becoming a city-state with historical factors (such as the Etruscan origin of the city and the presence of a bishop in year 1,000). More importantly, we show that the difference in social capital among towns that in the Middle Ages had the characteristics to become independent and towns that did not exists only in the North (where most of these towns became independent) and not in the South (where the power of the Norman kingdom prevented them from doing so). Our difference in difference estimates suggest that at least 50% of the North-South gap in social capital is due to the lack of a free city-state experience in the South.