The first universities were founded in Europe in the eleventh and twelfth centuries. In Scandinavia, the oldest extant universities can be found in Uppsala and Copenhagen — both universities opened in the late fifteenth century. My own institution, Lund University, was established in 1666 — following an earlier medieval academy in Lund, which was shuttered during the Reformation. (The Academy of Lund was connected to a Franciscan monastery.)
On one level, modern-day universities are a world apart from their medieval forebears. The numbers of the students and academics, and the range of courses and research on offer, are an order of magnitude greater today than in past centuries. But on another level, the mission of these institutions is fundamentally unchanged. The specialised skills communicated through higher education, as well as the knowledge and productive applications generated through research endeavours, are essential to understanding economic growth and humanity’s progress. Is it possible to trace the effects of the earliest universities on development?
Cantoni and Yuchtman examine the effect of the first German universities (in what was then the Holy Roman Empire) on the growth of marketplaces and cities. The first three German universities opened in the fourteenth century: Heidelberg (in 1386), Cologne (1388) and Erfurt (1392), with more following in the fifteenth century. Did these universities contribute to economic development of their host cities and neighbours?
The immediate problem confronting any such analysis of causal effects is that universities did not likely open at random. One could reasonably expect that more prosperous cities — or cities with better growth prospects — are more likely to seek a university. Cantoni and Yuchtman’s analysis relies on the fact that the medieval universities required authorisation by the Pope. That is, cities couldn’t simply establish a university at will. Moreover, unique external circumstances determined the timing of the first German universities: the Papal Schism of 1378.
The Two Popes
Until the first German universities opened, aspiring German academics had to travel abroad — for example, to Paris and Orléans in France. The schism, however, curtailed the opportunity for German students and professors to study and work overseas. In brief, the Catholic church was split between two popes — one based in Rome, whom the Holy Roman Empire (Germany) remained loyal to; the other based in Avignon, France. Given that universities were linked to the church, the environment for German academics in France became more hostile under the schism. Most chose to return to Germany.
Thus, the schism induced two key changes with respect to higher education in Germany: one, the sudden return of academics from France increased the supply of skills to offer higher education on German soil; two, the political ramifications of the schism increased the willingness to offer higher education. That is, the Roman church had an interest in establishing new (friendly) universities to rival the Avignon-aligned institutions in France and elsewhere. The timing of the new German universities had less to do with domestic economic circumstances in Germany, and more to do with externally induced effects resulting from the schism.
Cantoni and Yuchtman take advantage of this shock to analyse how the post-schism change in distance to the nearest university affected the growth of over 2000 German cities, proxied by rates of marketplace establishment. By considering the change in distance, the analysis is able to compare the effect on cities influenced by the new universities with cities where the nearest university remained abroad (for example, Prague).
The headline result is that there was no change in the rate of market establishment in cities where there was no change in university distance. By contrast, those cities which experienced a reduction in university distance exhibit a strong and statistically significant increase in market establishment — the effect becoming more pronounced with greater reductions in distance (that is, the closer a city to one of the new universities).
The authors include additional checks to address, among other things, the likely endogeneity associated with where the new universities were located (that is, if locations were chosen based on their favourable economic prospects, this would then contribute to the observed stronger economic outcomes, and thereby overstate the effect of the universities). The authors show that the correlation holds even for cities not in the same region as a new university. Furthermore, Cantoni and Yuchtman show that there was no change in market establishment trends in either England or Italy — countries where the schism, while still politically relevant, did not result in new universities being founded.
One can certainly set a question mark over the measure of economic development that Cantoni and Yuchtman apply. The authors motivate their choice of rates of market establishment (that is, grants to open a market or hold trade fairs), arguing that these reflect increased economic activity. As evidence for this, they show that there is a positive correlation between medieval market grants and city size in the years 1400 and 1500. Other municipal records also suggest a link between market establishment in a city and notable construction activity in the same city following the market grant.
The rise of cities is part of the story of long-term development, and urbanisation can be a broad proxy for prosperity. But that is not the same as saying that larger city sizes are under all circumstances evidence of greater prosperity (see, for example, Jedwab and Vollrath 2015). Moreover, and somewhat more problematically, merely being granted permission to establish a market does not reveal much about the volume of trade. But to some extent, this is quibbling at the margins. Studies of economic history (at least distant history) don’t typically have the benefit of being able to draw on detailed national accounts produced by statistical agencies.
Cantoni and Yuchtman offer an interesting angle for future research. They discuss the role of law studies in supporting institutional development; the contention being that growth in the number of law graduates improved the quality of public administration and contract enforcement. The story they sketch out is intuitively appealing, but the quantitative evidence to confirm any causal effect is lacking. Empirical analysis here would require better data on the number of law graduates and their subsequent employment. One could well imagine that graduates were more likely to remain in or near the city where they studied. To the extent that institutional quality was supported by law studies, it is possible that this progress expanded concentrically over time, starting in university cities and spreading from there.
Overall, Cantoni and Yuchtman’s analysis of German medieval universities is an interesting read with a clever empirical approach and plausible results. Moreover, their analysis makes a nuanced contribution to a broader discussion about the relative roles of human capital (education) and institutions in long-term growth: rather than thinking about one factor versus the other, it is perhaps more productive to consider how education and institutions interact and reinforce one another.