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A Tale of "Benevolent" Governments: Private Credit Markets, Public
A Tale of "Benevolent" Governments:
Private Credit Markets, Public Finance,
and the Role of Jewish Lenders in
Medieval and Renaissance Italy
MARISTELLABoTTIcIm
This article illustrates the impact of Jewish lenders on private credit markets and
public finance in medieval and Renaissance Italian towns. In Tuscan private credit
markets, Jewish lending helped households to smooth consumption, buy working
capital, and provide dowries for daughters. Jewish lenders also helped the public
finances of the communes in which they resided. This article shows that publicfinance considerations affected the choice of the interest-rate ceiling Jews were
allowed to charge. In many instances, the communes raised the interest-rate ceiling
for Jewish lenders in order to tax or borrow the proceeds.
T he
state is one among the institutions that can deeply affect the market
economy. As Avner Greif, Paul Milgrom, and Barry Weingast remark,
"One of the central questions about the institutional foundations of the market concerns the power of the state."' Taxation and regulation of the market
economy are powerful tools through which the state can exercise its power.
Since antiquity,governments have imposed price caps, interest-rateceilings,
quotas on imports and exports, wage controls, and regulations forjob safety
and product quality.2The fiscal interest of the state has sometimes affected
lThe Journal of Economic History, Vol. 60, No. 1 (March 2000). C) The Economic History
Association. All rights reserved. ISSN 0022-0507.
Maristella Botticini is Assistant Professor, Department of Economics, Boston University, 270 Bay
State Road, Boston, MA 02215. E-mail: [email protected].
I wish to thank Gary Libecap (the editor), Heath Pearson (the assistant editor), and two anonymous
referees for comments that greatly improved this article. I am indebted to Joel Mokyr, Edward Muir,
and Bill Rogerson for their guidance and helpful insights; to Francesco Bonomi for his simple yet
powerful search program on the 1427 Florentine Catasto. I also benefited from the comments of Lee
Alston, Loren Brandt, Saul Engelbourg, Giovanni Federico, Avner Greif, Farley Grubb, Timothy
Guinnane, Stephen Haber, Paul Hohenberg, John Munro, Michele Luzzati, Jean-Laurent Rosenthal,
Rodolfo Savelli, Ariel Toaff, Chris Udry, and seminar participants at Harvard University, University
of Illinois at Urbana, NorthwesternUniversity, University of Toronto, the Washington Area Economic
History Seminar, the Observatoire Francais des Conjonctures Jtconomiques (Paris), the American
Historical Association meeting in Seattle (January 1998), and the Economic History Association
meeting in New Brunswick, NJ (September 1997). Nancy Bernhaut provided excellent help in copyediting this article. Financial support from an Arthur H. Cole Grant-In-Aid from the Economic History
Association and from Ente Einaudi (Rome) is gratefully acknowledged. This article is a much-revised
and enlarged version of chapter 2 of the Ph.D. dissertation I wrote for the Department of Economics
at Northwestern University.
'Greif, Milgrom, and Weingast, "Coordination," p. 745.
2Diederiks, Hohenberg, and Wagenaar,Economic Policy; Epstein, WageLabor; Goldin and Libecap,
Regulated Economy.
164
Jewish Lenders
165
regulatorypolicy:in the MiddleAges, for example,Englishkings regulated
Jewishlendingto increasetheirtaxrevenues;3in thenineteenthcentury,U.S.
fiscal policy affected entryregulationin the bankingindustry.4In several
historicalcontexts,the ruler'sor state's abilityto appropriateor confiscate
throughtaxationand borrowinghas been an importantfactoraffectingresourceallocationand economicdevelopment.5
A criticalissue is determiningwhetherthese "intrusions"of the stateinto
the marketlead to an inefficientallocationof resourcesthat in turnmay
An interestinglaboratoryinwhichto testthe
hindereconomicdevelopment.6
effects of taxation and governmentregulationon resource allocation is
offeredby the Italiancity-statesin the MiddleAges andthe Renaissance.In
this period, Italiantowns were successful commercialcenters, which experimentedwith differentsystemsof taxationand governmentborrowing.
For example, the institutionof the funded public debt was invented in
medievalVenice, Genoa,andFlorence.7This articlestudiesthe regulation
andtaxationof Jewishlendingin manyItaliantownsfrom 1284to 1500 and
measures the impactofthis interventionon privatecreditmarketsandpublic
finances.
Economic historianshave long appreciatedthe importanceof capital
markets.In additionto LanceDavis's famousstudyon the implicationsof
capital-market
integration,numerousworkshaveinvestigatedthelong-term
economic impactof financialinstitutionssuch as banks,free banking,deposit insurance,universalbanking,stock exchanges,insider lending, and
ruralcapitalmarkets.8Othershave studiedthe interactionsbetweenprivate
creditmarketsandpublicfinance.9Morerecently,economichistorianshave
paidmoreattentionto smallerfinancialinstitutionsandless formalmechanisms for the allocationof capital.1 Throughall this researchwe can appreciatethemicroeconomicunderpinnings
of capitalmarkets,includingtherole
played by asymmetricinformationandcontractualforms.
3 Barzel, "Confiscation."
4 Wallis,
Sylla, and Legler, "Interaction."
5North and Weingast, "Constitutions";Hoffinan, Postel-Vinay, and Rosenthal, "Political Economy."
6North and Thomas, Rise; Hughes, GovernmentalHabit Redux; andNye, "T71inking
about the State. "
7Molho, Florentine Public Finances, "Trecitta-stato," and "The State and Public Finance"; Mueller,
Banks; and Luzzatto, Debitopubblico.
8 Davis, International Capital Markets; Buchinsky and Polak, "Emergence"; Calomiris, Do "Vulnerable "Economies? and "Costs"; Haber, "Regulatory Regimes"; Lamoreaux, InsiderLending, Neal,
Rise; Rosenthal, "Credit Markets" and "Rural Credit Markets"; Rothenberg, "Emergence"; and Sylla,
American Capital Market.
9 Hoffinan, Postel-Vinay, and Rosenthal, "Redistribution";Wallis, Sylla, and Legler, "Interaction";
North and Weingast, "Constitutions"; Potter and Rosenthal, "Evolution"; Sylla, American Capital
Market; and Velde and Weir, "Financial Market."
10Baliga and Polak, "Banks"; Banerjee, Besley, and Guinnane, "Neighbor's Keeper"; Guinnane,
"Cooperatives," "Failed Institutional Transplant,"and "Diversification"; and Hoffman, Postel-Vinay,
and Rosenthal, "Private Credit Markets" and "What Do Notaries?"
166
Botticini
Thisarticlecontributesto thislatestliteratureby focusingon anearlierperiod andon suchvibranteconomiesas thoseof the Italiantowns. Specifically,
it shows the effect of Jewishlendingon the publicfinanceof severalItalian
towns from the fourteenthto the sixteenthcenturiesand its impacton the
privatecreditmarketsof Tuscantowns in the earlyfifteenthcentury.In the
privatecreditmarketsof earlyRenaissanceTuscany,wherecreditcooperatives were still to be inventedandwherenotariesdidnot act as crucialfmancial intermediaries
as in modemFrance,Jewishlendingenabledhouseholds
to smoothconsumption,purchaseworkingcapital,andprovidetheirdaughters
with dowries.As a resultof livingin differenttowns andhavingenteredinto
Jewishlenderssharedriskwith each otherandtherebyhelped
partnerships,
ease theseeconomiesout of financialautarky.In contrastto argumentsmade
in previousstudies,thisarticlereassessesthepartplayedby Jewishlendingin
In particular,it showsthatJews did not merelyproprivatecreditmarkets.11
vide small consumptionloans to poor households,but also large loans to
wealthymerchants,artisans,prominentnotaries,andmedicaldoctors.
Jewish lending also benefitedthe public finances of the communes in
which they lived. Italiantown governments,often in need of money to finance ordinaryas well as extraordinary
expenses-such as grainsubsidies
in times of dearthor war against a neighboringtown-turned to Jewish
lendersfor funds,via taxationor loans.Moreimportant,town governments
regulatedJewishlendingin a way beneficialnot only to the "welfareof the
poor,"as was often claimed,but also to publicfinances.We will show that
besidesthewelfareof citizens,public-financeconsiderationsalso influenced
themaximuminterestrateJewswerepermittedto charge.Inmanyinstances,
communesset this ceilinghigh so thattheycouldappropriate
partof the rent
realizedby Jews on theirloans.By allowingJewishlendersto chargea high
interestrateandthen taxing them,town governmentsactuallyimposed an
additionaltax on theircitizens;in this case, the goods taxedwere the loans
extendedby Jewishlenders.
Giventhe criticalrole playedby Jewishlendersin bothprivateandpublic
creditmarkets,it is valuableto studytheir lendingpolicies, the economic
and demographicprofile of theirclientele,the degreeto which theirloans
improvedeconomicwelfare,andthe regulationof Jewish lendingby town
governments.
THE CONTEXT
In most countriesof centralandwesternEuropeat the end of the Middle
Ages, Jews were involved in lendingmoney at interest.In the twelfth and
thirteenthcenturiesJews migratedfromRome to northernItaly,settlingin
'" See Herlihy,Medievaland RenaissancePistoia; andCarpi,"AccountBook."
JewishLenders
167
almosteverytownalongtheway.In centralandnorthernItaly,Jewishlending reachedits apogeein the fourteenthandfifteenthcenturies.12
Duringthe MiddleAges, Christianlenderswere also very activeall over
Europe.Moneylending,especiallyat interest,was an importanteconomic
activityregulatedby town governments,kings, andthe CatholicChurch."3
While some of these restraints,such as the usury laws, might have been
welfare-enhancing,others createddistortionsand inefficiencies, such as
14 By thefifteenthcenturythesimplisticusuryprohibimarketsegmentation.
tion of an earliererawas rapidlyeroding.1 Lendingmoney at interestwas
neithertotallyforbiddento Christiansnor a completelyunregulatedenterprise;usurylaws were still in force,butwere considerablyweaker.
TheChurch'sbanon lendingmoneyat interestdidnot applyto Jews,who
were consideredto be outside the Christiancommunity.However, most
Italiantown governmentsregulatedJewishlendingin theirdomains.Jews
could settleand lend money at interestthrougha condotta,a bilateralcontractbetweenthe town governmentand the Jewish lender.Condottewere
long-termcharters,bindingbothpartiesfora periodbetweenfive andtwenty
years,andrenewableuponexpiration.Jewishlendershadto pay an annual
tax andagreeto lend (sometimesat favorableterms)to the commune.The
tax was not proportionalto the numberof loansmadeor the profitsearned,
but rathera lump sum paid at the beginningof each year or at specified
interimdates.It rangedfroma low of 55 gold florinsin San Gimignanoin
1425, to 1,200 gold florins in Florencein 1448, to 4,000 gold ducatsin
Venice in 1382. Holdersof these charters,Jews exercisedmonopolyrights
in pawnbroking.16
The chartersalso regulatedthe interest-rateceiling. Thisrangedfrom60
percentper annumin Cittadi Castelloin Umbriain 1402, to 42 percentin
Spoleto around1416, to 30 percentin most Tuscantowns in the fifteenth
century,to 15 to 20 percentin mosttowns belongingto the Venetianterraferma duringthe sameperiod,down to 10 to 12 percentin Veniceitself in
1382. These percentagesappliedto loans to local citizens;Jews were allowed to chargewhateverinterestratethey wishedto people coming from
12 Jews agreedto settle and lend money in Florenceonly after 1437 (Tripodero,
"Documenti").
Jewishbankersplayeda leadingrole in the historyof the Jewishcommunityof Venice(Jacoby,"New
Evidence";Mueller,Banks;andPullan,RichandPoor),whereasGenoawas exceptionalin theabsolute
absenceof Jewishpawnbroking(Heers,Genes;andEpstein,Genoa).
13Nelson, Idea of Usury;andNoonan,ScholasticAnalysis.
See GlaeserandScheinkman,"NeitheraBorrower,"foraninterestingargumenton usurylawsand
why they may be welfare-improving.
5Goldthwaite,"LocalBanking,"p. 31.
16Note, however,thatmonopolyrightsdidnotprecludetheexistenceof morethanone Jewishlender
in a given locality.ThemonopolyrightmerelyprohibitedotherJewsfromlendingmoneywithoutthe
permissionof the local incumbent,and without being regulatedand taxed by the local town
government.See Simonsohn,"Lacondizionegiuridica,"for an excellentsurveyon thesechartersand
on the legal statusof Jews residingin varioustowns.
168
Botticini
othertowns (whose creditworthinesswas harderto assess). In some towns,
the interest-rateceiling also variedwith the size of the loan. In 1421, for
example,Jews in Gubbiocouldcharge50 percenton loans smallerthanone
florin,45 percenton loansbetweenone andsevenflorins,and33 percenton
loans largerthan seven florins."7In othertowns, the interest-rateceiling
variedaccordingto the type of collateral.In 1382, for instance,Jewishlenders in Venicecouldcharge10 percenton loansagainstpawn,and 12 percent
on loans guaranteedwith a writtenbond.18
As for collateral,people could borrowfromJews by pledgingmovable
objects-such as clothes,shoes,jewels,andworkingtools-as pawns.Alternatively,borrowerscould provide a writtenpromise of repaymentto the
Jewish lender.In some instances,the borrowerhimself wrotethis deed; in
othercases, a notarydraftedthepromiseof repaymentbeforetwo witnesses.
A borrowercould also namea guarantor,who ensuredrepaymentof a debt
if the borrowerbecame insolvent.In some instances,Jews lent money on
trust, without asking the borrowerfor any guaranteesat all. They were,
however,excludedfrommortgagelending.Italiancity-stateslikely wanted
to preventJews(consideredto be foreigners)fromacquiringsignificantland
holdingsin theirterritoriesthroughmoneylending.Jews themselves,however,were reluctantin investingtheirwealthin land,a safe butvery illiquid
asset. ShouldJewishlendersneed to leave town quickly,eithervoluntarily
or underimposition,cash andjewels were moreliquiditems.
THE SOURCESAND THE SAMPLE
No studyexhaustivelydocumentsthe economicanddemographicprofile
of those who borrowedfromJews in medievalandRenaissanceItaly.The
main reasonis thatJewishlenders'accountbooks, which could have provided informationon theirclientele,have not survived.Even in those very
rarecases in which they have survived,the absenceof contemporarycensuses makesit almostimpossibleto tracea completeeconomic and demographicprofile of the borrowers.19
Therefore,many claims aboutthe economic impactof Jewishlendingareoften basedmoreon speculationsthan
on historicalevidence.
Thisarticleprovidesa completeeconomicanddemographicprofileofthe
clientsof Jewishlendersin early-fifteenth-century
Tuscanyby exploitingan
existing sourceof data-the Florentinecatastoof 1427-in a novel way. In
1427 the Florentinecity government,pressed by urgentfinancial needs
stemmingfromcontinuouswarfarewith otherItaliancities,triedto increase
17
Toaf, Jews in Umbria.
8 Mueller, "Charitable Institutions," pp. 631-34.
19 See Carpi ("Account Book"), who has studied the account books of a Jewish lender in Montepulciano in 1409/10.
Jewish Lenders
169
its tax revenues.To ascertainthe wealthof the citizensliving in all its territories,it undertooka catasto,a comprehensivecensusof personsandproperty. The head of each householdwas requiredto enumeratehis or her
houses,lands,anddraftanimals;cropsgrownandtypesof agrariancontracts
used; average crop yields of the previousthree years; debts and credits;
sharesof commercialpartnerships;
andoccupation.Furthermore,
he or she
had to reportthe compositionof his or her family by name, age, sex, and
relationshipto himself or herself.
Afterstudyingthemanuscriptsofthe catastoof 1427fortenyears,David
Herlihy and ChristianeKlapisch-Zuberhave made available a machinereadabledatabasecontaininganimpressiveamountof information.20
Unfortunately,though,theirfile containsonly aggregatefigureson debts,credits,
and total wealth, which gravelylimits its usefulnessfor the issues investigatedin this article.To identifythe Jewishlenders'clientele,I hadto search
in the catastomanuscriptshousedatthe StateArchivesof FlorenceandPisa.
By going throughroughly35,000 debts declaredby all 7,793 households
living in nine Tuscantowns and many villages in the countryside,I have
selectedthosehouseholdsthatclaimedto owe moneyto Jewishlenders.The
samplecontainshouseholdsborrowingexclusivelyfromJewishlenders,as
well as householdsborrowingfrom both Jews and fellow citizens;it does
not includehouseholdsborrowingexclusively fromtheirfellow citizens.21
THE ROLE OF JEWISH LENDING IN PRIVATE CREDIT MARKETS
Were Tuscan households actively involved in lending and borrowing
money in the earlyfifteenthcentury?Table1 indicatesthattwo-thirdsof the
householdsliving in nine Tuscantowns andmanyvillages were involvedin
credittransactions-as lenders,borrowers,orboth.22Furthermore,
one-third
of the loansto peasanthouseholdswere advancedby fellow peasanthouseholds subjectto correlatedshocks (Table2).
Loansservedvariousends.Peasantsborrowedto purchasedraftanimals,
merchantsto build inventories.Young heads of householdsborrowedto
smoothconsumptionandto purchaselandandworkingcapital.In addition,
olderheadsof householdssoughtloansto financedowriesfor theirdaugh20Herlihy andKlapisch-Zuber,
Toscans.
21 Given thatthe Florentinecatastoof 1427 is a cross-sectionalsurvey,one mightpoint out that a
studyof creditrelationshipswouldrequiretheavailabilityofpanel data.Evenwithall theshortcomings
of cross-sectionaldata,the catastooffersa uniqueandvaluablepictureof creditmarketsin the 1427
Florentinedominion.Moreover,it sheds light on economicgroupsthat seldom appearin historical
sources.Withrareexceptions(Balestracci,La zappa;andCastellani,Registro),peasantsandartisans
did not leave accountbooksor diaries.Fortunately,the catastoof 1427 does indicatethe lendingand
borrowingstrategiesof thesepeople.
22 TheTuscantownsconsideredinthis studyare:Arezzo,CastiglionFiorentino,Cortona,
Montepulciano,Monte San Savino,Pescia,Pisa, San Gimignano,andSan Miniato.
170
Botticini
TABLE1
PARTICIPATION OF TUSCAN HOUSEHOLDS IN BORROWING AND LENDING
(percentages)
Lenders
Borrowers
Nonborrowers
Total
29.3
10.1
39.4
Nonlenders
25.5
35.1
60.6
Total
54.8
45.2
100.0
Note: N= 7,793.
Sources: State Archives of Florence (hereafter ASF), Catasto 207, 208, 213, 214, 215, 216, 219, 233,
234, 235, 236, 248, 249, 252, 253, 254, 257, 258, 266, 269. State Archives of Pisa (hereafter ASPi),
Catasto 532, 533, 535, 552, 557, 558.
A large dowry enableda woman to find a better
ters or granddaughters.
matchin the marriagemarketandthus starta new householdandproduce
offspring.23
Whilemost householdsactivelyparticipated
in credit-market
transactions,
the dataalso show thatTuscancreditmarketswere local and isolatedespecially for peasanthouseholds:in 99 percentof the 2,587 loans to peasant
householdsin five of thenineTuscantowns,lenderandborrowerlived in the
sametown.Householdswhosemainsourceof incomeandwealthwasagriculture,and who thereforewere subjectto correlatedshocks,neverthelesslent
and borrowedlocally.Peasantslackedaccess to a regionalor largercredit
market,as therewereneitherruralbanksnorcreditcooperatives.As a result,
peasantsin Pesciadidnot lendto peoplelivingin Montepulciano,
peasantsin
Cortonaseldomborrowedfrompeopleliving in San Gimingnano,
and so on.
Institutionalbarriersandinformationcosts were responsiblefor the local
characterof ruralcreditmarkets.In the fourteenthand fifteenthcenturies
town governmentsdid theirbest to keep theireconomiesisolated,not only
as a protectioniststrategybut also as an expressionof sheerparochialism.
Statutesprohibitedforeign citizens from lending money againstpawn to
local citizens. Local citizens could not alienatetheir lands to foreigners,
effectively disallowingone potentialsourceof credit.Above and beyond
these rules,othertransactioncosts preventedthe developmentof a regional
capitalmarket.Travelcosts were an importantconcernin this period,as it
took a long time for peasantsto cover even smalldistances.A more importantproblemwas information.If peoplewereknownquantitiesin theirown
towns,in othertownstheircreditworthiness
was largelyconjectural.Whereas merchantshad developeda good communicationsystemthroughwhich
they could relayinformationaboutone another'sreputations,peasantshad
no such network.24
Peasantshadto wait fourmorecenturiesbeforethe in23Botticini, "Institutions,"
pp. 41-42, figures2.3 and2.4.
24See, forexample,the informationnetworkamongMaghribimerchantsengagedin the Mediterra-
nean tradein the eleventhcentury(Greif,"Reputation"
and "ContractEnforceability"),and among
merchantsat the Champagnefairs(Milgrom,North,andWeingast,"Role").
Jewish Lenders
171
TABLE2
LOANS TO PEASANT HOUSEHOLDS, BY CREDITOR TYPE
(percentages)
Peasant
Merchant
Jew
Othera
Total
35
30
22
13
100
artisans, notaries, clergy, messeri, charitable institutions, nobles, and monasteries.
Notes: N= 2,587. This table refers to peasanthouseholds borrowing from Jews inCastiglionFiorentino,
Cortona, Montepulciano, Pescia, and San Gimignano.
Sources: See Table 1.
aIncludes
ventionof creditcooperativesovercameproblemsof asymmetricinformation in ruralcreditmarkets.25
The isolated characterof ruralcreditmarketsimplied a welfare loss to
these local economies, especially in the presenceof aggregateshocks. In
fifteenth-centuryTuscany,these aggregate shocks stemmed from three
sources. First, weatherwas a source of both aggregateand idiosyncratic
shocks. Thunderstorms
hit specific landplots, but a suddenfrost could destroy all the vines in a village. Second,the Florentinetown government's
increasingneeds for ready cash to finance its wars often resultedin new
taxes for citizens living in all Florentineterritories.26
Third,enemy troops
besieging a town would often burncropsandkill cattlein the surrounding
countryside;sometimes,peasantsthemselvesdestroyedtheircropsandcattle
to keep enemy armiesfrom seizing them.All these ravageswere common.
Table 3 indicates the frequency of these aggregate shocks in medieval
Pistoia.
Similartablescan be drawnfor most Tuscan(and, in fact, Italian)towns
duringthe MiddleAges andthe earlyRenaissance.In the presenceof these
aggregate shocks, access to an external source of credit was crucial, but it
was hinderedby the institutionalbarriersand informationproblems describedabove.
This is where the economic role of Jewish lenderscame into play. Jews
had two competitiveadvantagesover other potentiallenders.First, their
wealthwas liquid,consistingmostlyof cashandeasy-to-sellobjectspledged
as pawns.The Florentinetown governmentalso prohibitedJews fromowning houses and land above a certainvalue.27Since Jewish wealth was not
primarilyinvested in land, it was not affectedby aggregateshocks in the
samemanneras otherpeople's:it was relativelyimmuneto weathershocks,
enemy plunder,andthe landtaxes frequentlylevied by Florence.
Second, Jewish lendershad an asset that other lendersdid not, namely
strongeconomicandsocialties amongthemselves.Studiesprovidesubstantial evidenceof the close familyties andeconomicconnectionslinkingJews
25 Guinnane, "Failed Transplant."
26 Motho, Florentine Public Finances.
27Cassuto, Ebrei, p. 122.
Botticini
172
TABLE3
AGGREGATESHOCKSIN PISTOIA,1296-1459
Event(s)
Year(s)
1296-1301
1303
1305-1306
Civil war betweenWhiteGuelfsandBlack Guelfs
Uprisingin the countryside;raidby Musonedella Moscacchia
Destructivesiege by FlorentineandLucchesearmies
1313
Famine
1321-1323
1328-1329
1339-1340
1346
1347
1348
1351
1354
1358
WaragainstCastruccioCastracani
WaragainstFlorence;war againstCastruccioCastracani;famine
Plagueandfamine(deathof one-quarterof the population)
Famine;uprisingin the countryside
Famine;traceof plague
BlackDeath
Siege by Florentinearmy;scarcity
Subventionof 1,750 florinsto Florence
Rebellionanduprisingin the countryside
1369-1370
Scarcity
1371
1375
1377
1386
1388
1389
1390
1393
1397-1399
1399-1400
1401-1403
1410
Banditsinfestingthe countryside
Subventionof 5,500 florinsto Florence;famine
Subventionof 2,000 florinsto Florence
Subventionof 17,500florinsto Florence
Subventionof 11,400florinsto Florence;scarcity
Plague;famine
Scarcity
Famine;plague
Subventionof 8,000 florinseachyearto Florence
Plague(deathof one-halfof the population)
FactionalfeudsbetweenCancellieriandPanciatichi
Famine;traceof plague
1411
1416
1418
Scarcity
Plague
Plague
1420
Scarcity
1423
1436-1439
1457-1458
Plague
Plague
Plague
Source: Herlihy, Medieval and Renaissance Pistoia, pp. 105, 198-23 1.
Throughthisnetworkof social
livingin differenttownsandregionsof Italy.28
lenderssharedriskwitheach
Jewish
relationshipsandeconomicpartnerships,
otherandtherebyaffordedcitizensaccessto externalsourcesof credit.
One might argue that merchantsliving in differenttowns could have
provideda similarfinancialnetworkandthat,in times of widespreadeconomic distress,thesemerchantscouldhaveborrowedandlentamongthemselves and then to their unluckierfellow townsmen,eitherby advancing
money or selling on credit. Merchants in Montepulciano, for example,
28Botticini, "New Evidence"; Cozzi, Ebrei; Luzzati, "Legami" and "Banchi"; Luzzatto, Banchieri
ebrei; Molho, "Note"; Mueller, "Pratiques Economiques"; Muzzarelli, "Luoghi," Ebrei, and Banchi;
Pini, "Famiglie"; Pisa, "Sulle attivitV";Segre, Jews in Piedmont; Simonsohn, Jews and History; and
Toaff, "Convergenza" and "Banchieri."
Jewish Lenders
173
boughtgoods on creditfrommerchantsliving in Florenceand Siena. Distance seems to have mattered,however,and merchantstypically chose to
buy goods on creditandborrowfromnearbyplaces.At most, merchantsin
theseperipheraltownsexchangedgoods andmoneywiththeirpeersin other
Tuscantowns.Meanwhile,Jewslivingin Tuscany,Bologna,Mantua,Milan,
Rome, and Venice had strongfamily and economic ties and often formed
partnershipsto runpawnshops.Consequently,they could quicklytransfer
substantialsums of money from one town to another.In the presenceof
aggregateshocks,Jews alonecouldconnecta local town economyto external sourcesof credit.Fourcenturiesbeforethe inventionof creditcooperatives, Jewishlendingservedas a bufferagainstadverseaggregateshocks.
Montidipieti couldhaveprovidedan alternativesourceof creditin these
economies.Thesewere local creditinstitutions,organizedby town governments, which collecteddepositsfromwilling citizensand lent to people at
advantageoustermsrangingfrom5 to 15 percentperannum.Createdunder
thepressureof Franciscanpreacherswhowantedto banJewishmoneylending
fromtowns,montidipietaiprovidedloanson pawn,mainlyto thepoor.However,manystudieshavepointedout thatmontidipietainevercompetedwith
The fact is that
Jewish lenders,who carriedon theirbusinessregardless.29
Jewishlendersandmontidipieta offeredservicesthatwere complementary
ratherthansubstitutes.30
Ontheonehand,the size of the loaneachpersonwas
allowedto ask for at montidi pieti was limitedto a certainsum;for larger
loanspeople had to turnto Jews.3"On the otherhand,especiallyin the very
earlyphasesof theirdevelopment,the montidi pietaisufferedthe recurrent
problemof raisingsufficientfnrdsto satisfythe demandfor loanssincetheir
depositors,livingallin thesametown,weresubjectto correlatedshocks.Thus
in timesof generalhardship,the supplyof fundsfelljust as the demandrose.
Jewish lenders,by contrast,providedaccess to externalsources of credit
thanksto theirwidespreadeconomicandsocialnetworks.
The advantagesof Jewish creditwere well recognizedby citizens and
rulers of towns belonging to the Florentinedominion. When requesting
Florence'spermissionto admita Jewishlenderinto theirtown, representatives always emphasized"thefinancialdistressthatthe paupersexperience
The focus on the needs of
because of the absence of a Jewish lender."32
pauperswas due to the banthe Churchhad instatedagainstlendingmoney
at interest.To avoid the Church'spunishment,town governmentsresorted
29Fomasari,n "Thesoro";Menning,Charity;Pullan,Richand"JewishMoneylending";
andSegre,
"Banchi."
30Milano,"Considerazioni,"
p. 216.
31 For example, in Cortonathe maximumamountthat each borrowercould borrowwas 20 lire
(Cortona,Bibliotecadell AccademiaEtrusca,CodiceCortonese,Manuscript520, Capitolidel Monte
Pio).
32 StateArchivesof Florence(hereafter
ASF), Statuti501, fol. 158.
174
Botticini
to "theneeds of the poor"in grantingthe chartersto Jewish lenders.However,as will be shownin the next section,once settledin thesetowns Jewish
lendersadvancedcreditto muchlargersegmentsof the population.
The studyof the catasto of 1427 shows thatin these local creditmarkets
Jewishlendingwas significant.As canbe seen in Table4, a largeproportion
of householdsborrowedfrom Jewishlendersin Tuscantowns: in Arezzo,
almost one-fourth,in CastiglionFiorentino,one-third;in Montepulciano,
one-fourth;in MonteSan Savino,almostone-fifth;in Pescia,one-fifth;and
in San Gimignano,one-sixth.33
Jewish loans amountedto roughly 10 percent of the total debt of all
households.To betterappreciatethe magnitudesat stake,note thatthe average value of loans in these tablesis 13.7 florins,comparedwith an annual
averagesalaryof 14 florinsfor an urbanworkerin Florencein 1427.
Giventhe prominenceof Jews in Tuscancreditmarkets,the studyof the
economicanddemographicprofileof householdsborrowingfromJews,far
from being a historicalcuriosity,can providevaluableinformationon the
degreeof segmentationin these markets.
THE ECONOMICAND DEMOGRAPHICPROFILEOF
THE JEWISHLENDERS' CLIENTELE
Both SchlomoSimonsohnandMariaMuzzarellireportthatthe socialand
economicidentityof the Jewishlenders'clientelein medievalItaliantowns
After studyingone of the few survivingJewishlenders'
remainsobscure.34
accountbooks, writtenin Montepulcianoin 1409/10, Daniel Carpiargues
thatJewishlenderslent small sums of moneyto poor people.35Meanwhile,
after examiningnotarialdeeds, Ariel Toaff points out that wealthy merchantsandlandlordsalsoborrowedfromJews.36As thisarticlewill highlight
in the next section, the type of collateralused was based on the financial
standingof the borrowers.Given that poor people (bad risks) borrowed
againstpawn,they were likelierto be listedin the Jewishaccountbooks.On
the otherhand,richpeople (good risks)were moreaptto borrowfromJewish lenders by providing written promises of repayment or notarial
33In 1428 a dispute arose between the citizens of Cortona and the Jewish lender regarding the terms
of the charter. This fact might explain the small size of Jewish lending in Cortona at the time of the
catasto (Cortona, Archivio Storico del Comune, Manuscript F). As for Pisa, the percentage of households borrowing from Jewish lenders is suspiciously small, since at the time of the catasto, one of
wealthiest and more prominent Jewish lenders lived and owned a profitable business there. One possible explanation for the small measured size of Jewish lending in Pisa may lay in the unwillingness of
Pisan citizens to diligently compile their declarations (Pisa had been forcibly incorporated into the
Florentine territories in 1406, and Pisan citizens always resented Florentine rule).
34Muzzarelli, "Luoghi"; and Simonsohn, "Stato attuale."
3S Carpi, "Account Book."
36Toaff, rino.
Jewish Lenders
175
TABLE4
SCALE OF JEWISH LENDING IN TUSCAN TOWNS, 1427
Households Borrowing from Jews
AreZZO*
Castiglion Fiorentino
Cortona
Montepulciano
Monte Sansavino
Pescia
Pisa*
San Gimignano
San Miniato
Total
Total, excluding
Cortona and Pisa
Debts to Jews
Number
Percentage of Total
Amount
(gold florins)
Percentage of
Total Debts
217
165
118
180
62
197
80
99
44
1,160
18.2
30.2
6.1
26.4
22.4
20.3
4.7
17.2
13.6
14.8
5,261
1,652
1,892
2,501
516
1,896
1,704
2,456
670
18,548
11.6
14.9
5.1
14.8
25.3
8.8
0.6
8.4
4.4
8.2
962
23.3
14,955
10.3
*
The figures for Pisa and Arezzo include citizens living in town, not those living in the countryside.
For all other towns, figures refer to citizens living in towns and in the corresponding countryside.
Sources: See Table 1.
deeds. Therefore,studies that focus separatelyon either Jewish account
books or notarialdeeds are likely to generatea selectionbias.
Based on the fact that Jews were considered foreigners and were not
required to compile a declaration for the Florentine catasto of 1427,
HerlihyandKlapisch-Zuberarguethatthe catasto cannotyield any information on Jewish lending.37What they fail to appreciate is that the
catasto could actually offer a wealth of informationon Jewish lending if
one examines every debt declaredby each household, particularlydebts
to Jews. No selection bias arises from the study of the catasto: each head
of household, rich or poor, peasant or merchant,is listed in this census
and propertysurvey.
Who borrowedfrom Jews, accordingto the catasto of 1427? The main
findingis that,in all Tuscantowns,the median(mean)wealthof those who
borrowedfrom Jewish lenderswas greaterthanthe median(mean)wealth
of those who did not (Table5). A t-testindicatesthatthe differencebetween
the meanwealthofthose borrowingfromJewsandthemeanwealthof those
not borrowingfromJews is significantatthe 1 percentlevel. Whenlooking
at percentiles,13.5 percentof householdsborrowingfrom Jewish lenders
hadwealthvaluedatmorethan500 florins;thecorrespondingpercentagefor
householdsnot borrowingfromJews is 4.7 percent.These findingscontradict the commonopinionthatJews specializedin smallconsumptionloans
to poorpeople.38Whilethe "needsof the paupers"mighthave been a valid
37 Herlihy and Klapisch-Zuber, Toscans.
38 Carpi, "Account Book"; and Herlihy, Medieval and Renaissance Pistoia.
Botticini
176
TABLE5
WEALTHOF HOUSEHOLDSBORROWINGAND NOT BORROWINGFROMJEWS, 1427
(gold florins)
Wealthof Households
BorrowingfromJews
Wealthof Households
Not BorrowingfromJews
(N
(N- 1,160)
6,633)
Town
Mean
Median
Mean
Median
Arezzo
Castiglion Fiorentino
Cortona
Montepulciano
Monte San Savino
Pescia
Pisa
San Gimignano
San Miniato
All towns
431.9
231.2
181.8
195.7
163.9
246.4
412.7
489.3
280.6
293.9
178
152.2
114.8
152.7
81.5
189
179.5
256.4
113
132.5
201.7
112
115
112
61.5
164
356
232
178.3
200.2
76
75
40
68
45
121
75.5
58
39
55
Note: A difference-of-meanstest on all towns yields a t-statisticof 4.33, well above the 1 percent
criticalvalue of 2.32.
Sources:See Table1.
concern of town governments when inviting Jewish lenders to settle in their
towns, it turns out that wealthy citizens also benefited from their presence.
This finding is even more important if one considers the use borrowers
made of these loans. Data from the catasto indicate that artisans, and merchants to a largerextent, borrowedmoney to finance productive investments.
Among their creditors were Jews.39While wealthy merchants, prominent
notaries, and rich landlords might borrow from Jews for consumptionsmoothing purposes, it seems reasonable to assume that these loans also
helped to fmance productive investments.
Analysis of two other economic indicators-occupation and land ownership-casts even graver doubts on the contention that poor urbanworkers
and humble peasants were the primaryclientele of Jewish lenders. As Figure
1 indicates, loans to peasant households were by far the most numerous.
Given that the majority of Tuscan households derived their income and
wealth from agriculture,this finding is hardly surprising. What is striking is
that artisans,merchants,notaries, andmedical doctors--citizens ofthe greatest wealth and highest social standing-received loans that were few in
number and yet significant in size. Furthermore, although Jewish lenders
were excluded from the mortgage market,95 percent of households borrowing from Jews owned land;the correspondingpercentage for households not
borrowing from Jews is 86 percent.
Examining the household structureofthe Jews' clientele reveals thatloans
were sought especially by households with daughters: Jewish loans
39Botticini, "Institutions," p. 41, figure 2.3.
JewishLenders
177
Value of Loans
(florins)
Number of Loans
Percentage
-CXc:-c:Percentage
| [, -c:58-62
-] <
>>ec>e
lD
|C-c:-C |
EI2
Agriculture 72.84
[1]
|:
e i ee
>>
12.64
Other
3.45
11
11
1.28
Professionals
0.69
U
*
|
4.90
Notaries
5.52
S
l< ,<
13.70
Merchants
7.02
1.01
Clergy
0.35
7.85
Artisans
10.13
C
>C
><><>J><>
jC
=
g
FIGURE 1
CLIENTELEOF JEWISHLENDERS,BY OCCUPATION
Note:Thedatareferto thetownsof Castiglion
Fiorentino,
Cortona,
Montepulciano,
Pescia,andSan
Gimignano.
Source:ASF,Catasto207,208,213,214,215,216,219,233,234,235,236,248,249,252,253,254,
257,258,266,269.
amountedto 17 percentof debtsof householdswith daughters,as compared
to 12 percentof debtsof householdswith only male childrenand 8 percent
of debtsof householdswithoutchildren.Thisis particularlyinterestingsince
dowries played an importantrole in increasingthe likelihoodof marriage
and,therefore,directlyaffectedthe fertilityrate.
JEWISH LENDING POLICIES
To evaluatethe economicrole of Jewsin thesemedievalandRenaissance
economies,it is essentialto studytheirlendingpolicies. Did Jewishlenders
vary theirinterestratesaccordingto the wealthof the borrower?Did they
requiredifferenttypes of collateralfromdifferentborrowers?
In principle,nothingprohibitedJewsfromchargingdistinctinterestrates
to differentborrowers.The chartersestablishedmaximumannualinterest
ratesbutleft Jewsthefreedomof chargingless. Inthe catasto,someborrowers specifiedthe interestratethey paidon theirdebts.Table6 indicatesthat
interestrateson loans amongfellow citizensvariedbetween6 and 15 percent, whereas Jews always chargedthe maximuminterestrate allowed.
178
Botticini
TABLE6
NUMBER OF HOUSEHOLD DEBTS, BY INTEREST RATE AND CREDITOR TYPE
AnnualInterestRate
(percentages)
Debts to Citizens
Debts to Jews
(N = 69)
18)
(N=
6
1
7
7.5
8
9
10
12
13
14
1
1
3
2
4
2
1
2
15
1
1
7a
20
25
30
2
59
aFive of theseloansweremadein Montepulciano,wherethe interest-rate
ceilingon Jewishloanswas
set at 20 percent.
Sources:See Table1.
In fact, both bad and good risks paid the same interestrate:among the 59
borrowerswho paid the maximuminterestrate on loans from Jews (30
percentin all Tuscantownsexceptin Montepulciano)werebothwealthyand
poor citizens.
In contrast,Jewish lenders appearto have accepteddifferenttypes of
collateralbased on the affluenceof the borrower.Poorpeople mostly borrowed againstpawn,while richhouseholdsenjoyedmore favorablecollateral requirements(Table7). These householdscould borrowon a written
promiseof repayment,a guarantor,or even on trust,not providingany formal guaranteeat all. A t-test shows thatthe differencebetween the mean
wealthof those borrowingagainstpawnandthe meanwealthof those borrowing with othercollateralis significantat the 5 percentlevel.
Why,froma borrower'sperspective,was a loanagainstpawnless preferable than a loan guaranteedwith a privatedeed or by a guarantor?Pawns
TABLE 7
COLLATERAL DISCRIMINATION BY JEWISH LENDERS
Borrower'sWealth
(gold florins)
Typeof Collateral
Numberof Loans
Mean
Median
Pawn
Othertypes of guarantee
133
73
365
535
72
113
Note: A difference-of-means
testyields a t-statisticof 2.03, abovethe 5-percentcriticalvalue of 1.65.
Sources:See Table 1.
Jewish Lenders
179
TABLE 8
NUMBER AND VALUE OF JEWISH LOANS, BY TYPE OF COLLATERAL
Value of Loans
(gold florins)
Type of Collateral
Number of Loans
Mean
Pawn
Other types of guarantee
133
73
46
122.3
Median
20
50
Note: A difference-of-means test yields a t-statistic of 3.01, above the 5-percent critical value of 1.66.
Sources: See Table 1.
limitedthe size of loans since the amountlent could not exceed two-thirds
of the value of the pawn.40Althoughmovableitems like clothing,swords,
shoes, or hammerswere widespreadandeasily pledged,theirvalue hardly
allowed borrowersto obtain large loans. Moreover,the borrowerhad to
relinquishthe pawn untilthe completerepaymentof the loan. Table8 confims thatthe median(mean)size of loansagainstpawnwas smallerthanthe
median(mean)size of loansguaranteedwithprivatedeedsorby guarantors.
Tables 7 and 8 indicatethat Jewish lendersdiscriminatedamong their
customersby askingdifferentborrowersfordifferentformsof collateral.By
asking a borrowerto pledge a pawn, Jewish lendersindirectlylimitedthe
size of the loan.Prohibitedfromchargingbadrisksinterestrateshigherthan
the ceiling set in the charters,Jewishlendersrationedcreditto theseborrowers by askingthem to guaranteetheirdebtswith pawns. Meanwhile,good
risks could obtainlargerloans since Jewishlendersprovidedloans guaranteed with less restrictivecollateral.
THE ROLE OF JEWISH LENDING IN PUBLIC FINANCE
The importanteconomicroleof Jewswas not limitedto theprivatesector.
The publicfmancesof Italiantowns also benefitedfromJewishlending.In
the fourteenthand fifteenthcenturies,taxes and forcedloans from citizens
were not sufficient to finance ordinaryexpenses such as official salaries.
Moneywas also requiredto financewarfareagainstneighboringtowns, and
to subsidizegrainin times of widespreaddearth.Table9 indicatesthe various ways in which Jewishloans helpedthe public financesof Italiancommunes, using data from Perugia, a town in Umbria. Similar data are available
for other Italian towns.
In additionto providing largeloans, Jewish lenders also helped the finances
of the communes in which they resided through the annual tax they paid for
the privilege of settling and lending money. This tax seems to have depended
both on the size of the town (and thus the prospective clientele), and on the
interest-rateceiling imposed (Table 10).
40Cortona,Bibliotecadell 'AccademiaEtrusca,CodiceCortonese,Manuscript520, fol. 3v.
Botticini
180
TABLE9
JEWISH LOANS TO PERUGLA, 1284-1434
Year
Size of Loan
(gold florins)
1284
1284
1284
1287
1293
1312
1312
600
400
510
1,000
150
600
200
1315
1377
1381
1,000
1,000
500
1384
1385
1385
1386
1389
1392
1392
1392
1416
1423
1,000
500
545
500
700
500
500
500
100
231
1428
1434
500
600
Purpose or Terms of Loan
Guaranteed by five citizens
Guaranteed by five citizens
Guaranteed by five citizens
Guaranteed by five citizens
25 percent interest, to pay a mercenary soldier army in the war against
Spoleto
Zero-interest, to finance the war against Gubbio
For the contract service of the rights and products of the Lake
On the occasion of a five-year charter granting Jews permission to reside and
lend money
To pay soldiers to defend the town
For military expenses to subdue the villages of Montone and Fratta
To celebrate a victory
To pay soldiers to help Siena
To buy food for citizens
For military expenses and to send an envoy to Pope Boniface IX
To meet fmancial difficulties
To pay honors bestowed to the Pope visiting the town, and to subdue a castle
To defend the town from Braccio Fortebracci
Jewish share of a 12,000-florin exaction by Braccio Fortebracci, Lord of
Perugia, to arm troops.
For military expenses to defend the town of Citta di Castello
Source: Toaff, Gli Ebrei a Perugia.
A critical issue is whether the interest-rateceiling for Jewish lenders was
set to maximize the welfare of citizens (as was often claimed), or whether this
regulation also benefited public coffers. The historical evidence indicates that
in several instances town governments raised the ceiling in orderto appropriate part of the rent earned by Jewish lenders on their loans. This argument
rests on three findings. First,town governments allowed Jews to charge interest rates above the rate set by usury laws. As an example, let us consider the
Tuscan towns. At the time of the catasto of 1427, shares of the Florentine
public debt paid 5, 8, and 10 percent interest.4"The average interest rate on
citizen-to-citizen debt was roughly 10 percent (Table 6). Meanwhile, Jewish
lenders were allowed to charge 30 percent in most Tuscan towns.
Second, thanks to this privilege and to their lending policies, Jewish lenders likely earned a rent on most of their loans. They lent to good risks at the
same rate they charged bad risks (Table 6), but they minimized the potential
losses on high-risk loans by demanding pawn (Table 7). In several instances,
41The Monte Comune paid 5 percent interest, the Monte de 'prestanzoni 8 percent, and the Monte
di Pisa 10 percent (Molho, Florentine Public Finances, p. 72).
181
Jewish Lenders
TABLE 10
ANNUAL TAXES PAID BY JEWISH LENDERS AND INTEREST-RATE CEILINGS
Region
Town
Year of Charter
Tuscany
Castiglion Fiorentino
Cortona
1414; 1419
1422
1466
1429
1437
1425
1437
1448-1459
1471
1471-1491
1408-1447
1382
1387
1513
1399
1406
1418
Montepulciano
Prato
San Gimignano
Florence
Veneto
Romagna
Volterra
Venice
Bologna
Interest-Rate Ceiling
(percentage)
Annual Tax8
30
30
30
20
30
30
20
20
15
20
30
11 b
9b
80
150
150
60
800
55
800
1,200
0
1,200
100
4,000
17.5b
6,500
607
552.5
339
30
30
25
b
0
aFigures are in gold florins for Tuscan towns and for Bologna, and in gold ducats for Venice.
b
These interest rates are averages of two different rates applied to loans of different size or guaranteed
with different types of collateral. For example, Jews could charge 30 percent on loans against pawns
and 20 percent on loans with written guarantees or with a guarantor.In other towns, different rates were
applied to loans of different sizes: 30 percent on loans below a certain amount, and 20 percent on loans
above a certain amount.
Sources: For Castiglion Fiorentino, Cortona, Montepulciano, and San Gimignano, data from ASF,
Statuti 201, fol. 482; 280, fol. 251; 501, fol. 158; 759, fol. 201. For Florence and Prato, data from
Cassuto, Ebrei, pp. 85, 120. For Volterra, data from Luzzati and Veronese, Banche, pp. 57-87. For
Venice, data from Mueller, "Charitable Institutions," pp. 63-64; and Pullan, Rich and Poor,
pp. 674-75. For Bologna, data from Muzzarelli, Banchi ebraici, pp. 15-40.
town governmentsraisedthe interest-rate
ceiling for Jewishlenderswiththe
explicit purposeof enablingthem to earn a larger rent. For example, in
Spoletoin 1416,the Jewishlenders,in orderto providethe towngovernment
witha loanof5Ogoldflorins,wereallowedto chargea higherinterestrate(42
percentversus30 percent)for six months.42
Third,by taxingandborrowing
fromJewishlenders,town governmentsappropriated
partof this rent.
Data on interest-rateceilings in many Italiantowns allow one to test
whether these governmentscared about public revenue when regulating
Jewish lending (Table 10). If a town governmentaimed to maximize its
revenues,thereshouldbe a positive relationshipbetweenthe Jewishlender
paying an annualtax to the town governmentand the interest-rateceiling.
Similarly,thereshouldbe a positiverelationshipbetweenthe Jewishlender
providingloansto the town governmentat favorabletermsandthe interestrate ceiling. Considerthe following equationdeterminingthe interest-rate
ceiling to be offeredto Jewishlenders
42 Toaff, Jews in Umbria.
182
Botticini
(1 + i)= a+,TAX+
yLOAN+c5E+e
(1)
whereTAXandLOANaredummyvariablesthattakeon a value of one if the
Jewishlenderpays an annualtax andprovidesfavorableloans to the town
government,respectively.43E is a vector of exogenous shifters, such as
region, population,andthe numberof competingChristianbankers.If the
town governmentaimedto maximizeits revenue,/ and y shouldbe positive; the Jewishlenderchargedcitizensa higherinterestrate,earneda rent,
andthen transferredpartof this rentto the town governmentby payingthe
annualtax or providingcheaploansto the commune.
The regressionreportedin Table11 revealsthatwhen regulatingJewish
moneylending,fiscal policy was a primaryconcernfor town governments:
the coefficienton the annualtax dummyis positive andstatisticallysignificant, meaningthatwhen the Jewish lenderpaid an annualtax to the local
town government,the interest-rateceiling was higher." Similarly,when
Jewsprovidedfavorableloansto thecommunes,theinterest-rateceilingwas
higher(thoughin this case the coefficienton the loan dummyis not statistically significant).
Attilio Milano and Reinhold Mueller suggest that town governments
ceilingon Jewishlendingto raiseadditional
mighthaveusedtheinterest-rate
This articlehas gone one stepfurther:it hasproposedandtested
revenues.45
the hypothesisthattown governmentswere, in effect,taxingtheirown citizens whenthey establishedlocal monopoliesin Jewishlending,allowedthe
Jewishincumbentto chargehigh interestrates,andthentaxedawaypartof
the ensuingrent.Directtaxes on wealthand income were difficultto levy,
especiallyin timesof widespreadeconomicdistress.Raisingdutiesandother
commoditytaxes would have been very unpopular.On the otherhand,allowing Jewsto chargehigherratesandthentaxingthemyieldedtwo results:
towngovernmentsobtainedrevenues,andcitizenswillinglypaida premium
for a financialservice they valued highly.Whilethe "welfareof the poor"
was the mainjustificationoffered by governmentswhen inviting Jewish
lendersto settle andlend money in theirtowns, it turnsout thatthe regulation of Jewishlendingalso benefitedpublicrevenues.
The regression in Table 11 presents anotherinterestingfinding. The
interest-rateceiling was lower in largertowns such as Florenceor Venice,
be determined
43 One might reasonably argue that TAXandLOANare also endogenous variables-to
simultaneously with the interest-rate ceiling. However, TAX and LOAN can be viewed as exogenous
variables, determined by the fiscal needs ofthetown government at the time the charteris signed. These
fiscal needs are mainly determined by exogenous factors, such as famines, wars, and other similar
events that require extraordinary sums of money (see Table 9).
I Ideally, the regression should include the size of the annual tax and the size of the loan provided
by the Jewish lender to the commune to measure the effect of fiscal policy on the interest rate ceiling.
However, since this information was missing for some towns, the regression uses dummy variables.
4 Milano, "Considerazioni"; and Mueller, "Charitable Institutions."
Jewish Lenders
183
TABLE 11
OLS REGRESSIONRESULTS:DEPENDENTVARIABLEAS LOGOF INTEREST-RATE
CEILINGON JEWISHLENDERS,1382-1573
Constant
XV( = 1 if observationis in fifteenthcentury)
XVI( = 1 if observationis in sixteenthcentury)
Tuscany(= 1 if town is in Tuscany)
Veneto(= 1 if town is in Veneto)
Umbria( 1 if townisinUmbria)
Taxpayer( = 1 if Jew pays an annualtax)
Lender( = 1 if Jew lendsto the commune)
Size ( 1 if town is "large")
R2
AdjustedR2
F-statistic
N
Coefficient
StandardError
2.91
0.20
-0.11
-0.07
-0.24***
0.46***
0.24*
0.09
-0.19***
0.66
0.62
11.07
71
0.17
0.13
0.21
0.06
0.07
0.16
0.14
0.05
0.05
*=
Significantat the 10 percentlevel.
= Significantat the 1 percentlevel.
Note: Dummy variablesfor the fourteenthcentury,and for the Marcheregion, have been omitted.
StandarderrorsareHuber-Whiterobuststandarderrors.
Sources:Dataon annualtaxes,loans,andinterestratesaretakenfromASF, Statuti201, 280, 501, 759;
Campanini,"Quodpossitfenerari'; Cassuto,Ebrei; Chiuppani,Ebrei; Ciardini,Banchieri ebrei;
Ciscato,Ebrei;Jacoby,"NewEvidence";Luzzati,"Ilegami";LuzzatiandVeronese,Banche;Luzzatto,
Banchieriebrei;Milano,Storiadegli ebrei;Molho, "Note";Mueller,"CharitableInstitutions,"and
"Pratiques 6conomiques"; Pullan, Rich and Poor; Muzzarelli, Ebrei e citta, and Banchi ebraici; Pini,
Rinaldi,"Topografia";
Simonsohn,
"Famiglie";Pullan,RichandPoor, and"JewishMoneylending";
Jews in the Duchy ofMantua; Toaff, Ebrei a Perugia, Jews inA4ssisi, and Jews in Umbria; Tripodero,
andZen Benetti,"Prestatori."
"Documenti";Varanini,"Appunti";
where Jews likely faced more competition from Christian banks. Florence
and Venice were successful in negotiating a comparatively lower interestrate ceiling for their own citizens, whereas they let the Jewish lenders charge
higher interest rates in smaller towns under their dominion.
CONCLUDING
REMARKS
This article belongs to two strands of literature.On one hand, it contributes to the recent literatureon credit markets, which pays more attention to
smaller financial institutions and to less formal mechanisms for the allocation of capital. For example, Philip Hoffman, Gilles Postel-Vinay, and JeanLaurent Rosenthal have highlighted the crucial role of notaries in Parisian
credit markets in the eighteenth century.46Although notaries were not bankers, they did serve the purpose of matching borrowers and lenders. The
notaries knew who had money to lend and who had secure collateral. Their
prominent role of financial intermediaries contributed to the creation of a
larger credit market in eighteenth-century France. Timothy Guinnane, for
46 Hoffiman, Postel-Vinay,
and Rosenthal, "What Do Notaries?"
184
Botticini
anotherexample,has highlightedthe impactof ruralcreditcooperativeson
the economic development of nineteenth-centuryrural Germany and
Ireland.47By reducing the asymmetric information that characterized rural
creditmarkets,ruralcreditcooperativesgainedGermanfarmersaccess to a
largercreditmarket.
Ruralcreditcooperativesdidnot exist in medievalandRenaissanceItaly,
hasyet to be investigated.
andthe role of notariesas financialintermediaries
Weknow,though,thatmedievalItalianmerchantbankers,especiallyfrom
Florence,Genoa,and Venice,were the financialprotagonistsof medieval
andRenaissanceEurope.Jewishlenders,by contrast,have often been relegatedto the narrowrole of pawnbrokers,extendingsmall, short-termconsumptionloansto thepoor.Theirrolein theeconomicdevelopmentof medieval andRenaissanceItalyhasthusbeendeemedmarginal.Thisarticlecasts
seriousdoubtson these claims.By showingthatJewishlendersalso lent to
wealthy artisans,merchants,notaries,landlords,and medicaldoctors,and
thattheirloanswere also usedto purchaseworkingtools anddraftanimals,
andto financeintergenerational
transfers,this articlesuggeststhatthe economic impactof Jewish lenderson the economic developmentof Italian
cities duringthe MiddleAges andRenaissancewas far frommarginal.For
example,by helpinghouseholdsto amassdowriesfortheirdaughters,Jewish
loansindirectlyenhancedthe fertilityrateand,hence,thepopulationgrowth
of these economies. While Jewish lendersdid provide small, short-term
consumptionloansto poor households,they also extendedlong-termloans
to merchants,artisans,and peasantsto finance the purchaseof tools and
capitalequipment.
Moreover,living in differenttownsandoftenbeingorganizedin business
partnerships,Jewishlenderssharedriskwith each otherandallowedtowns
to accessa largercreditmarket.Usurylawsmademoneylendinganunprofitable businessfor wealthyItalianmerchants.These merchantspreferredto
invest their capitalin loans to kings and popes, and in foreign trade.Although Italianpawnbrokersexisted duringthe thirteenthand fourteenth
centuries,theirnumbersdecreasedin the fifteenthand sixteenthcenturies.
The increasingneed of creditwas then met by Jews.
The importanceof Jewishlendingwas not limitedto privatecreditmarkets. Jewishlendersalso facilitatedthe publicfinancesof the communesin
which they resided. The second strandof literatureto which this article
belongs analyzes the impactof the state, and specifically of government
taxationandregulation,on marketeconomies.Thehistoryof the regulation
of Jewish lending in medievaland RenaissanceItaly indicatesthatpublic
financehada largeeffect on theways these lenderswereregulatedandcasts
doubtson the "benevolent"governments,whichclaimedto regulateJewish
47 Guinnane,"Cooperatives"
and"FailedInstitutionalTransplant."
Jewish Lenders
185
lenders for the "welfare of their citizens." Italian town governments often
turned to Jews to finance their deficits: they taxed, and borrowed at favorable terms from, Jews. Besides citizens' welfare, public-finance concerns
also affected the maximum interest rate that Jews were permitted to charge.
These communes sometimes had a direct interest in setting these rates high
so that Jews garnered a rent which the town governments could borrow or
tax. By allowing Jews to charge high interest rates and then taxing them,
town governments were in effect able to impose an indirect tax on their
citizens.
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