Medieval Universities, Legal Institutions, and the Commercial Revolution

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.