Class Differences and the Commercial Revolution: An Equilibrium Selection Story
2021, Economic Modelling, 100, pp.105508
Abstract
The reopening of the Mediterranean routes in the tenth century sparked, in some regions of Europe, a long period of economic boom. It also triggered a social change whereby some members of the nobility, despite their social status, turned to commerce. I explain these events through the lens a Kiyotaki and Wright (1989) model, extended to a two-country world. The response of the elite to a communication shock causes the economy to transit from a low- to a high-production equilibrium, if pre-existing class differences are not too large.