UNIVERSITÀ DEGLI STUDI DI MODENA E REGGIO EMILIA

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UNIVERSITÀ DEGLI STUDI DI MODENA E REGGIO EMILIA

Dottorato di ricerca in Lavoro, Sviluppo e Innovazione Ciclo XXX

Diversity and Inequality in a Long Run Perspective

Candidato: Luca Silvestri

Relatore: Prof.ssa Graziella Bertocchi

Correlatore: Prof. Massimo Baldini

Coordinatore del Corso di Dottorato: Prof.ssa Tindara Addabbo

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Per aspera ad astra.

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Ringraziamenti

Concluso il dottorato, è tempo di bilanci. Sono stati per me anni intensi, durante i quali ho imparato molto e sono cresciuto sia dal punto di vista professionale, sia come persona.

Ringrazio la prof.ssa Graziella Bertocchi per l’aiuto puntuale che mi ha dato in questi anni, spronandomi sempre a cercare il miglioramento in ogni dettaglio, e per il confronto aperto e schietto.

Ringrazio il prof. Massimo Baldini per il costante, vivace e amichevole confronto e conforto di questi anni, nonché per l’enorme pazienza dimostratami già dai tempi della laurea.

Ringrazio molto il prof. Oded Galor, e tutto il Department of Economics della Brown University di Providence, per l’accoglienza gentile e per il tempo che mi è stato dedicato.

Ringrazio, infine, i miei colleghi tutti, specialmente i “Dembers” per i bei momenti passati.

Un pensiero particolare lo rivolgo ad Antonella e Giovanni: non dimenticherò questi anni insieme.

Ai miei genitori, che mi hanno permesso di essere quello che sono, va il mio primo pensiero e la mia riconoscenza più grande.

Ringrazio mio fratello e mia sorella, presenze costanti e salde nella mia vita.

Non ringrazierò mai a sufficienza Chiara, che ha condiviso con me questi anni con disponibilità e comprensione. Il tuo costante supporto è stato per me fondamentale. La tua presenza un’ancora.

Ai tanti, che per diversi motivi non cito individualmente, va il mio grato pensiero.

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Abstract

This dissertation aims at investigating and understanding the long run trends in wealth inequality, and its effects on the economic development of a society. Furthermore, more generally, it aims at inquiring the role of diversity in the transition from the Malthusian Regime to the Modern Growth Regime. Through a detailed analysis of the available data and documents, and the development of up-to-date models, and through the application of the most recent econometric techniques, the goal of this dissertation is to clarify whether the long run changes in the economic system are correlated with the inequality and diversity levels of a society.

The first chapter investigates the inequality in wealth distribution in two fifteenth century Italian cities, Florence and Verona. Thanks to the extremely detailed sources we can rely on, after an historical and social introduction we compute, for both societies, some of the most used inequality measures. Furthermore, for each society we discuss the relationships between some socio-economic variables and the inequality.

The second chapter presents a theoretical model that explains the link between genetic diversity, conflict and growth. In the model, diversity (approximated by the number of groups that constitutes the population) has a negative effect on the economic growth in the first stage of development. The diversity reverses it effect in the second stage of development, when it became positive for growth, given its complementarity with the technological progress.

The third chapter studies the relation between subjective poverty and the local quality of government in Europe. We separate the effects of the quantity and quality of public services and we show that good governance significantly reduces the probability of being subjectively poor. Furthermore we compute the additional cost a family as to bear in order to achieve a given level of welfare, if it lives in a region with inefficient public institutions.

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Abstract

Questa tesi mira ad analizzare e comprendere le tendenze di lungo periodo nella diseguaglianza della distribuzione delle ricchezze e l’effetto di quest’ultima sullo sviluppo economico di una società. Inoltre, più in generale, si vuole studiare quale ruolo abbia avuto la diversità nella transizione storica dal periodo malthusiano al periodo di crescita moderno.

Attraverso l’analisi approfondita delle fonti statistiche e documentali disponibili, lo sviluppo di modelli e l’applicazione delle più recenti tecniche econometriche, questa dissertazione ha come obbiettivo quello di chiarire se i cambiamenti di lungo periodo del sistema economico sono correlati con il grado di diseguaglianza e diversità di una società.

Il primo capitolo indaga la diseguaglianza nella distribuzione della ricchezza in due società del quindicesimo secolo italiano, Firenze e Verona. Grazie alle fonti estremamente dettagliate che abbiamo a disposizione, dopo una introduzione storica e sociale calcoliamo, per entrambe le società, alcune delle misure di diseguaglianza più frequentemente utilizzate.

Inoltre, per ognuna delle società analizzate, si discutono le relazioni esistenti tra alcune variabili socio-economiche e la diseguaglianza.

Il secondo capitolo presenta un modello teorico che spiega il rapporto tra diversità genetica, conflitto e crescita economica. In particolare, nel modello la diversità (approssimata dal numero di gruppi presenti nella popolazione) ha un effetto negativo sulla crescita dell’economia nella prima fase di sviluppo. Questo effetto diventa positivo per la crescita durante la seconda fase di sviluppo, a causa della complementarietà tra innovazione tecnologica e diversità.

Il terzo capitolo studia la relazione tra povertà soggettiva e qualità di governo locale in Europa. Separando gli effetti della quantità dei servizi offerti da quelli della qualità degli stessi, in questo capitolo mostriamo come una buona qualità delle istituzioni locali riduce significativamente la probabilità di sentirsi soggettivamente poveri. Calcoliamo inoltre il costo aggiuntivo che una famiglia deve sostenere per raggiungere un dato livello di benessere, se vive in una regione caratterizzata da istituzioni pubbliche inefficienti.

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Introduction

This dissertation aims at investigating and understanding the long run trends in wealth inequality, and its effects on the economic development of a society. Furthermore, more generally, it aims at inquiring the role of diversity in the transition from the Malthusian Regime to the Modern Growth Regime. Through a detailed analysis of the available data and documents, and the development of up-to-date models, and through the application of the most recent econometric techniques, the goal of this dissertation is to clarify whether the long run changes in the economic system are correlated with the inequality and diversity levels of a society.

The first chapter (The Inequality of Wealth in Two Early Renaissance Societies) investigates wealth inequality in the Italian fifteenth century. In particular, we focus on two cities: Florence and Verona. The extremely detailed sources we can rely on allow us to cover almost all the century, shedding light on the distribution of wealth and many other economic and social variables. For each society, after a brief historical and social introduction, we compute some of the most used inequality measures and we reconstruct the dynamics of wealth inequality across the considered time span. This research differs from others in terms of population investigated, time period and geographical coverage: our focus is, in fact, on the entire population of cities only (thus, excluding the rural peripherals areas), from the twenties of the fifteenth century to the very beginning of the subsequent one. The results of this chapter are somehow different from those of other authors, especially because we find a negative trend for inequality in the considered period. For each society, an investigation of the relationships between inequality, wealth and population is also provided, as well as a discussion over the possible lasting effects of the fourteenth century Black Death.

The second chapter (The Two Sides of Diversity: Conflict and Technological Progress in the Long Run) presents a theoretical model in which the transition from a Malthusian Regime to a Modern Sector economy is crucially influenced by the number of different

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groups which constitutes the population. The endogenous growth of the technology is negatively affected by conflicts, which in turn are more severe in diverse societies, so that the emergence of a modern and innovative sector is delayed. The model predicts that in the first stage of development, the steady state level of the total population is adversely influenced by the number of different groups, while the long run level of per capita output is unaffected.

Only after a technological threshold is surpassed, the economy enters in the second stage of development and a modern sector emerges. The number of groups now plays a crucial and increasing pro-growth role, due to the complementarity of diversity and modern technological progress, and given the possibility for workers to migrate from one sector to the other. An empirical test of the theoretical predictions is also performed.

The third, and last, chapter (Quality of Government and Subjective Poverty in Europe) investigates the effect of quality of government on subjective poverty across European countries and regions, taking advantage of recently released data on the quality of public institutions and of information on household subjective poverty, at the sub-national level. In the analysis we separate the effects of quantity and quality of public services on perceived well-being, controlling for the size of the local government and for the quantity of in-kind services received by each household of the sample. Results suggest that good governance significantly reduces the probability of being subjectively poor, both over the whole population and also among households that are poor in terms of monetary income. We then estimate the greater cost that a family has to bear in order to achieve a given level of welfare, if it lives in a region with inefficient public institutions. Our measure of this inefficiency cost is around 6% of disposable income.

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Chapter 1 The Inequality of Wealth in Two Early Renaissance Societies

1. Introduction

Is it possible to compute the level of inequality in the distribution of wealth for preindustrial societies? What was its speed of change in early-modern societies? To answer these questions, we take advantage of data regarding the Florentine Domains and the city of Verona in the fifteenth century. In particular, we rely on the database “Census and Property Survey for Florentine Domains and the City of Verona in Fifteenth Century Italy”, released by the Data and Information Services Center of the University of Wisconsin-Madison in 2010, to compute some of the most important inequality measures.

After a brief description of the data, the chapter analyses two Italian Renaissance societies: Florence in 1427, 1458 and 1480 CE, and Verona in 1425 and 1502 CE. The choice of these two cities can be justified as follows. First of all, the corresponding two societies were similar with respect to the economic and occupational structure¹, and their economies were both at the center of a dense network of commerce, trade and financial relationships². Moreover, and most importantly for our research, they were considered, even by contemporaneous observers, at the edge of good governance. Venice, and hence indirectly the city of Verona that was under Venetian jurisdiction from 1405, was considered “the city

1 Malanima (2002), pp. 151-158.

2 In particular, Verona is reported as a trading fair host and Florence as a banking center (Bertocchi and Bozzano, 2016).

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absolutely better administrated”³. Unfortunately, “not even a partial census”⁴ of Venice for the period here considered has been preserved, but in the above-mentioned database we have data from the Campioni d'Estimo⁵ of the city of Verona. The hypothesis that justifies the choice of Verona is that, in the twenty years after the conquest, the Venetian Republic was able to impose its modern administrative system, within which the fiscal system was an important part. Regarding the Tuscan city, with the adoption of the Catasto, Florence was trying to achieve the excellent quality of administration already expressed by the Venetians, in fact “evidently Florence, together probably with other Italian cities, was learning from Venetian practice”⁶. Hence, the two cities considered in this research were, as already said, the most brilliant examples of the good governance, if not for the whole of contemporaneous Europe then at least for the Italian political scene.

For both cities, after a brief historical introduction, we first describe the respective social, demographic and employment structure. Next, we analyse the phenomenon of inequality in these two societies, by calculating for each of them the Gini index and other relevant measures, and by following their development over the time span considered.

The main results can be summarized as follows. For Florence, we compute a Gini index of approximately 0.80 in 1427, that decreases until 1458 to around 0.65 and then remains stable for the 1480 wave of observations, around the value of 0.64. For the city of Verona we also find a small decrease in the value of the Gini index, from approximately 0.53 in 1425 to around 0.47 in 1502. A parallel analysis of the concentration of wealth by deciles of the population leads to results that are consistent with those based on the Gini index.

The literature on economic inequality and its development has a long tradition, going at least as far back as Kuznets (1955). His main hypothesis was that of an inverted U shape of the income distribution of a society during its stages of development, from the pre-industrial period to the post-industrialization one (the so-called Kuznets curve). This hypothesis is, however, under critique. In recent years in particular a large quantity of literature on inequality in the historical distribution of income and wealth has arisen, mainly after the publishing of a book by Piketty (2013) about the long term development of inequality in the

3 Herlihy and Klapisch-Zuber (1988).

4 Herlihy (1973), p.92.

5 A Campione is both a preparatory document for the actual Estimo, in which all the relevant variables are collected, and the final result of the actual Estimo. See Tagliaferri (1966), for details.

6 Herlihy (1973).

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distribution of income and wealth which seems to refute the Kuznets hypothesis. Closer to the period considered in this chapter, Milanovic, Lindert and Williamson (2011) focused on inequality in preindustrial societies, from the Roman Empire to British-ruled India, and on methodological issues, such as the determination of the Inequality Possibility Frontier.

However, the closest research to that presented here, in terms of spatial and time distances, is that of Alfani (2015), on inequality in the northern part of Italy, and Alfani and Ammannati (2017), a long run view of the Florentine State.

The results of this chapter could also be useful in shedding light on the debate on the effects of inequality on economic development, that counts at least three main different theories. The Neo Classical one, starting with Kaldor (1956), assuming a higher saving rate for the richer part of the population, states that inequality in the distribution of income (thus, in the long run, of wealth) could play a pro-growth role via physical capital accumulation. The second theory states that, after the Galor and Zeira model (1993), inequality is harmful for growth since in every economy constraints exist that impede the optimal allocation of production factors. The newest theory (Galor and Moav, 2004) recomposes the previous two, arguing that inequality has a positive effect during the first stage of development (when physical capital is the engine of the economy), while it has a negative impact on growth when the economy is driven by human capital accumulation and the poor cannot exploit all of their human capital.

The rest of the chapter is organized as follows: Section 2 briefly presents the data used, in Section 3 we analyze the city of Florence and its inequality development over time, while we do the same for the city of Verona in Section 4. Section 5 provides concluding remarks.

2. The Data

The “Census and Property Survey for Florentine Domains and the City of Verona in Fifteenth Century Italy” is a database, published in 2010, that collected data from the Campioni (tax declarations) of the households who resided under the Florentine and Venetian jurisdiction. The version we use (Darcy Edition)⁷ is an update of the original by Herlihy and Klapisch-Zuber (1977): from 1966 to 1976 they had the Catasto of 1427 coded in electronic

7 http://www.disc.wisc.edu/archive/catasto/index.html.

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machine readable format for the city and the territories of Florence and a 10% sample of it for Florence in 1458 and 1480.The Estimi for the city of Verona in 1425 and 1502 also belong to this version: for the Venetian city “parts of the 1425 survey have been lost. Therefore, the data set includes only those households and parishes for which records have survived. The survey of 1502 is also incomplete as it includes only those parishes which are included in the earlier survey”⁸. The unit of analysis is the fiscal household: very close to the modern definition, that was the entity to whom the taxes were levied. The Florentine dataset contains around 62,000 observations, while the Veronese one around 3,000 (Table 1). Other details regarding the data will be discussed in the sections dedicated to the single society considered.

Table 1 – Descriptive statistic for the Florentine Domains and the City of Verona (fifteenth century CE)

Total Gross Wealth Observations Mean Std.

Deviation Min Max

Florentine Domains

(florins) 62,275 258.7 1523.7 0 162,906

City of Verona (soldi

d’estimo) 2,918 14.9 30.8 0 513

3. Florence

3.1 Historical and social context

The city of Florence was founded by the Romans in 59 BCE, with the name of Florentia (derived from Floralia or Ludi Florales, the Roman festivity of early spring). Until the tenth century, the city and the surrounding area suffered various dominations: after the Roman Empire, the hegemony of Byzantines and barbarian peoples (among them the Ostrogoths, the Longobards and the Franks). In 1115 CE Florence became a free city and soon the opposing factions of Guelphs and Ghibellines were outlined, the Guelphs in favour of the papacy, the Ghibellines in favour of the emperor of the Holy Roman Empire. Despite this severe internal rivalry, the city of Florence was able to militarily expand to the

8 http://www.disc.wisc.edu/archive/catasto/index.html.

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surrounding territories: at the beginning of the fifteenth century its control extended from Romagna (Castrocaro) to Pisa and from Garfagnana to the territories of Siena⁹. The rise to power of the Albizzi family, in the late fourteenth century, marked the rapid growth of the city as an economic power, mainly thanks to its families of merchants and bankers (the Medici, the Strozzi, the Tornabuoni and the Alberti to name but a few). Those families were able to place Florence in the middle of a dense supranational network of trades, where the gold florin was the international currency¹⁰.

The growing political importance of the Medici family was due, in particular, to the figure of Giovanni di Bicci (1360-1429) and his son Cosimo de Medici (1389-1464), who often sided with the people against the ruling oligarchy. In addition to the growing consciousness of other Florentine families, they brought about the 1427 decision to redact the Catasto. This was a new distribution method of the tax burdens, whereby the taxable base was focused on wealth instead of on consumptions, hitting the rich families more (Herlihy and Klapisch-Zuber, 1988). To quote the words of Rinaldo di Maso degli Albizzi (1370-1442) "It must include an estimation method which, unlike the others, does not lead to any discrimination; this method is the Catasto, which may be imposed on clear and established foundations" (as cited in Herlihy and Klapisch-Zuber, 1988). The Catasto was to give the answer to two problems that plagued Florence in those years: a request for a greater equity in the distribution of tax burdens and the need for more funds, in order to continue the war against the Visconti of Milan and to finance the public works that marked Renaissance Florence. The preparation of the registry was conducted extraordinarily fast considering the tools available to the government at that time, in fact on June 1430 the document was considered complete. All the households in the Florentine territories were represented in it (the universality of the Catasto means that even the propertyless were included in it) and, for each one, a lot of information was collected, such as assets (consisting of movable and immovable property, receivables, working tools, beasts and animals of value, spices and miscellaneous merchandises), the number of dependents of the breadwinner, and their relationship with the latter (son, widowed mother, wife), gender, age, employment and the name, surname and patronymic of each householder. Although we have notice of other

9 Fanfani (1961) and Vivanti (2005).

10 Feniello (2013).

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registers and censuses in history, the Florentine one of 1427 is probably the most detailed and best preserved¹¹.

The analysis of this Catasto only for the city of Florence, thus eliminating the countryside and other Tuscan cities under the jurisdiction of the municipality, provides deep insights into the distribution of wealth and the living standards of the city inhabitants in the early part of the fifteenth century. First, we note that the Florentine population of 38,305 units was divided into 9,780 families, giving an average number of 3.9 people per household, slightly lower than that of other Italian cities around the same time (Tagliaferri, 1966).

Not surprisingly, the most common occupations in the city of Florence were those related to its administration (notaries, couriers, public employees). The processing and selling of wool and the textile industry in general (weaver, carder, dyer, silk weaver) were also present as well as most commercial and financial occupations (merchants, bankers). In descending order, the professions, based on the average shareholders’ equity, follow this hierarchy: at the top operators in banks and finance, followed by wool merchants and other employees of the textile industry, lawyers and then a number of craftsmen including paper manufacturers, tanners, potters, blacksmiths and carpenters.

Florence was believed to be a very unequal society (at least from a modern perspective) with respect to the distribution of wealth. As a consequence, turmoil sometimes escalated into open riots (like the tumult of the Ciompi in August 1378; Tagliaferri, 1972), in which the populace asked for the recognition of more economic and political rights¹². To overcome this problem, the city administration also decided to apply some deductions to the total taxable assets. The inhabitants of the contado (rural area) enjoyed the deduction of a soldo for each team of oxen used for work in the fields, as well as a deduction of five per cent of the cost of fertilizers. For the inhabitants of the city of Florence other types of deductions existed, often designed to encourage the full declaration of goods, such as the full deduction for the family home and its furnishings and also, with a variable rate, for credits and cash (pecunia

11 Other examples of sources similar to the Catasto (mainly registers of tax and properties) can be find in Van Zanden (1995) or Alfani (2015).

12 Vivanti (2005), pp. 290-296. With respect to the economic activities, the Ciompi (the humblest workers of the wool industry) claimed the creation of new guilds: in particular the tailors guild, the dyers guild and the Ciompi guild itself. With respect to the political rights, the passive electorate raised after the Ciompi tumult from about 3 thousands to 13 thousands citizens, and the three new “minor” guilds entered in the communal government.

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numerata), as well as on the tools needed for daily work life¹³. But the most important deduction was that concerning the individual: 200 florins of wealth indiscriminately deducted for all inhabitants of the city of Florence (the only other similar deduction in the whole Florentine Domains was that for the inhabitants of the city of Pisa, where 50 florins was deducted for each member of the household), because that amount was considered the minimum threshold of wealth needed for a decent life. We can then say that the taxable wealth was the "superabundant" (Herlihy and Klapisch-Zuber, 1988), i.e. that part of the wealth that was not needed to work, for the (re)production of wealth or to guarantee a minimum standard of living. This setting of the law was, in some cases, counterproductive for the municipality of Florence, always looking for new funds. For example the full deduction of the value of the home encouraged the construction of new houses and palaces, diverting funds from the highly productive sectors of textile and finance to the housing sector, with the result of removing from the tax base a lot of wealth (Goldthwaite, 2013). To verify and properly enforce the law, several offices in key areas of the Florentine economy were created by the administration, especially where it was easier to hide wealth, such as trade and finance. Thus a rudimentary form of economic police was born, which through random checks of warehouses, account books and with a permanent office at the Monte was able to deter potential evaders. Furthermore in the drafting of the law the measure of keeping low rates was applied for those movable easy to hide from the taxman and harsh, often actually enforced¹⁴, penalties for violators were imposed (loss of all rights in front of the civil and criminal justice, a doubling of tax due, incarceration)¹⁵.

3.2 Inequality Measures

The principal authors who have worked on fifteenth century Florence are Herlihy and Klapisch-Zuber (1988), Goldthwaite (1984, 2013) and Milanovic, Lindert and Williamson (2011). The results obtained from them regarding inequality measures in the city of Florence are a Gini index equal to 0.788 for wealth (Herlihy and Klapisch-Zuber, 1988) and of 0.471 for income (Milanovic, Lindert and Williamson, 2011. The per capita before deductions

13 See Herlihy and Klapisch-Zuber (1988) for the complete list of deductions.

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wealth is indicated by Herlihy (1977) in 273 florins and the family wealth in 1,022 (respectively of 790 and 208 florins after the deductions). Milanovic, Lindert and Williamson (2011) assumes, for the city of Florence only, an annual per capita income of 34.6 florins that derives basically from the application of a wealth returns rate equal to 7% (i.e. the one used by the fiscal administration of Florence, as stated in Herlihy and Klapisch-Zuber, 1988)¹⁶. Alfani and Ammannati (2017) provides a long run overview of the wealth inequality in the Florentine territories. Although similar to the present research in terms of sources used and topics, there are some crucial differences. First of all, the territorial unit of analysis here is the capital city of Florence only, while it is excluded in the cited work. With respect to the period considered, the one analysed here (the fifteenth century) is only a part of theirs, that covers a longer time span. Another very important difference is the presence in our research of the whole population registered in the Catasto for the city of Florence (clergy was formally the only exception), thus we do not exclude the propertyless that account for more than 14%, as well as any other important part of the population.

Thanks to the details contained in the Catasto it is possible to quantify the inequality in the distribution of wealth, using the Gini index and other inequality measures. The territorial unit in which we are concentrated is the city of Florence only (thus we exclude the contado and the distretto¹⁷). We compute the Gini index for both the gross and the net and for equivalent and non-equivalent wealth. In order to determine the wealth equivalent we use the equivalence scale 𝑆 = 𝑁^𝜃, where 𝜃 = 0.5, that is simply the square root of the number of household members¹⁸. We are aware that this is an arbitrary choice that can significantly change the results. Given that, we have selected this scale for its simplicity and frequent use¹⁹.

16 See Milanovic, Lindert and Williamson (2011) for the complete procedure of income estimation.

17 The contado “was the surrounding hinterland that originally embraced the dioceses of Florence and Fiesole was the rural territory under the direct jurisdiction of the city of Florence […]”, as stated in Alfani and Ammannati (2017), p. 3. The Distretto was the remaining part of the Florentine Territories that was not included in the Contado (for example, but not limited to, the cities and the surroundings areas of Arezzo, Pisa, Cortona, Pistoia). For more details about the territorial division of the Florentine Domains, see Herlihy and Klapisch- Zuber (1988).

18 Baldini and Toso (2009).

19 All these considered, in the Appendix we report the results obtained by using a different scale, i.e. the one implicitly suggested by Milanovic, Lindert and Williamson (2011), and we show how the inequality measures does not critically change.

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The number of household members is available only for the 1427 wave of Catasto, thus the number of observations for this particular exercise is restricted to 9,780.

In 1427, more than 14% of the Florentine households (1,431 over 9,780) did not own anything and, after the deductions were applied, the proportion of propertyless rises to 31%.

At the other end of the social ladder, some families held a large share of Florence’s wealth:

the richest one per cent (less than one hundred families) had assets equal to 25% of the total.

In fact, out of a total of 10,081,080 gross florins, the 98 richest families (1%) possessed 2,553,629 florins, equivalent to 25.3% of the total, while the richest 5% of the population (489 families) held 5,162,425, equivalent to 51.2 % of the total gross wealth. With respect to net wealth, the richest one percent had more than two million florins, corresponding to a share of 27.2%, while the wealth of the richer five percent is equal to 54.1% of the total (7,616,580 florins). The results for the inequality measures are presented in Table 2 and Table 3.

The Gini coefficient of the distribution of gross, non-equivalent wealth is 0.786, while the Gini for the same, but equivalent, distribution is higher and equal to 0.790. Regarding net wealth the inequality measured for equivalent wealth is slightly greater than the non- equivalent one (0.816 and 0.814, respectively). The other inequality measures²⁰ are consistent with this ranking, except for the generalized entropy indexes with a coefficient α equal or less than one. The indexes of this group are more sensitive to the variations across the tails of the wealth distribution, whilst the half of the coefficient variation squared, with α=2, is more sensible to variations in the central part of the distribution.

Another way to see how unequal a society is, is the Lorenz curve of the distribution of wealth. The farther the actual curve is from the equidistribution line (45 degree line), the more unequal the society is. The Lorenz curves for the distribution of wealth in the city of Florence are reported in Figure 1.

20 See Cowell (1977) for an extensive discussion of inequality measures.

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Table 2 – Inequality Measures (not divided by the equivalence scale), Florence 1427 Inequality measures Total value of assets (gross) Taxable (net)

Gini coefficient 0.786 0.814

Relative mean deviation 0.615 0.641

Coefficient of variation 3.512 3.598

Standard deviation of logs 1.771 1.647

Theil index (GE(a), a = 1) 1.295 1.212

Mean Log Deviation (GE(a), a = 0) 1.408 1.261

Entropy index (GE(a), a = -1) 10.019 7.829

Half (Coeff.Var. squared) (GE(a), a = 2) 6.169 6.474

Table 3 – Inequality Measures (divided by the equivalence scale), Florence 1427 Inequality measures Equivalent total value of assets (gross) Equivalent taxable (net)

Theil index (GE(a), a = 1) 1.321 1.219

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Figure 1 – Lorenz curves of the wealth distribution in Florence, 1427

[Source: Our calculations based on data from the Catasto.]

As already seen in Tables 2 and 3, and depicted again in Figure 1, the inequality in the distribution of net family wealth in Florence was higher than that of the gross distribution.

Dividing the wealth (both gross and net) by the equivalence scale, thus looking at the individual equivalent wealth, gives us a similar figure: the gross distribution was distributed in a more equal manner. This means that the fiscal system of the city of Florence was regressive (excluding the deduction of 200 florins per capita).

Table 4 and Figure 2 show the distribution of the total gross wealth in Florence by deciles of population (each consisting of 978 households), in both tabular and graphical format.

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Table 4 – Distribution of wealth by deciles of the population (households), Florence 1427 Decile Population (individuals) Gross Wealth (florin) Share of Wealth (%)

1 3,544 0 0

2 3,605 4,859 0.048

3 3,614 34,973 0.346

4 3,748 85,265 0.845

5 3,626 163,947 1.626

6 3,699 284,800 2.825

7 3,652 481,526 4.776

8 3,907 826,917 8.202

9 4,275 1,564,308 15.517

10 4,599 6,637,217 65.838

Total 38,269 10,081,080 100

Note: Differences in total may be due to rounding errors.

Figure 2 – Distribution of wealth by deciles of population, Florence 1427

As it is evident from these numbers, the city of Florence in 1427 was a very unequal society, with a Gini coefficient of almost 0.8 and most of the wealth possessed by the richest decile of the population. But this is only true if we use our modern sensibility to the inequality sphere: a Gini index of around 0.75 was indeed fairly common across cities of the whole of

0%

10%

20%

30%

40%

50%

60%

70%

1 2 3 4 5 6 7 8 9 10

Shares of Wealth

Deciles of Households

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medieval Europe²¹. We can also remark that the fiscal system was regressive rather than progressive, in fact the inequality measures are worse after the deductions. Having computed the wealth equivalent, we find a further worsening of inequality which demonstrates that the most numerous families were also the poorest.

3.3 The Dynamics of Inequality

Thanks to the Catasto, we can investigate the time dynamics of the wealth inequality in Florence for the period 1427 to 1480. In particular, from the same dataset used as before, we use the 10% sample (the maximum available) of the Catasto of the City of Florence in 1458 and in 1480. The data used are descripted in Table 5.

Table 5 – Descriptive statistics for the city of Florence, 1458 and 1480

Location Frequency Percentage Average gross wealth (florins)

Florence 1458 750 47.44 690.51

Florence 1480 831 52.56 456.52

Total 1,581 100.00 567.52

Even if we have such few observations, we think it is possible to compute a reliable measure of inequality, also because of the similar distribution of the households in the different parts of the city (quarters and gonfaloni) in the different years considered. The number of observations divided for the various quarters (in absolute numbers and as a percentage of the total) is reported in Table 6.

21 Van Zanden (1995).

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Table 6 – Number of households by quarter and year (in absolute number and as percentage)

1427 1458 1480

Location Frequency % Frequency % Frequency %

S. Spirito - Scala 549 5.6 41 5.4 46 5.5

S. Spirito - Nicchio 488 5.0 38 5.1 39 4.7

S. Spirito - Ferza 821 8.4 65 8.6 68 8.2

S. Spirito - Drago 962 9.8 67 8.9 67 8.1

S. Croce - Carro 311 3.2 27 3.6 29 3.5

S. Croce - Bue 573 5.8 49 6.5 54 6.5

S. Croce - Leon Nero 413 4.2 36 4.8 38 4.6

S. Croce - Ruote 434 4.4 14 1.9 40 4.8

S. M. Novella - Vipera 215 2.2 25 3.3 28 3.4

S. M. Novella - Unicorno 601 6.1 46 6.1 53 6.4

S. M. Novella - Leon

Rosso 596 6.1 41 5.5 44 5.3

S. M. Novella - Leon

Bianco 539 5.5 43 5.7 42 5.1

S. Giovanni - Leon

d’Oro 1115 11.4 91 12.1 103 12.4

S. Giovanni - Drago 668 6.8 52 6.9 54 6.5

S. Giovanni - Chiavi 953 9.7 70 9.3 78 9.4

S. Giovanni - Vaio 542 5.5 45 6.0 48 5.8

Total 9780 750 831

The spatial distribution of the households is similar (indeed, the percentage of households residing in each quarter is alike for the years considered), so we assume that the 10% samples of the surveys of 1458 and 1480 are representative of the whole of the population of Florence. Given that, it is possible to compute the inequality measures of the distribution of wealth from the available sample and generalize the results for the whole of the city. The inequality measures for the years 1458 and 1480 are presented in Table 7 and Table 8. The Gini index, as well almost all the other measures, indicates that the gross distribution of wealth was more equal with respect to the net one. Only some generalized entropy indexes (coefficient α equal or less than zero) are higher for the distribution of the taxable wealth, and only for the year 1458.

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Table 7 – Inequality Measures, Florence 1458

Inequality measures Total value of assets (gross) Taxable (net)

Theil index (GE(a), a = 1) 0.672 0.673

Table 8 – Inequality Measures, Florence 1480

Inequality measures Total value of assets (gross) Taxable (net)

Theil index (GE(a), a = 1) 0.543 0.544

The Lorenz curves for the gross (total value of assets) and net (the taxable wealth) distribution of wealth reported in the Catasto of 1458 are reported in Figure 3.

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The Lorenz curves for the gross and net distribution of wealth reported in the Catasto of 1480 are reported in Figure 4.

From Tables 7 and 8 we see a moderate movement towards equality in the distribution of wealth, as in the time span between the 1427 and the 1458, with a clear descending trend.

What the Figures 4 and 5 cannot display is the absolute (i.e. measured in florins) wealth reached by the economy in the two years considered: this can be understood by looking at Figure 5.

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Figure 5 – Distribution of wealth (in florins) by deciles of population, 1458 and 1480

From Figure 5 it is clear that the gross wealth of the city of Florence had fallen from 1458 to 1480. This could be as a consequence of the extreme political fragmentation of the Italian peninsula, and of the wars related to this, when Florence was often in the front row due to its political and geographical position²².

With respect to inequality, Table 9 and Figure 6 are better than the previous to understand what the dynamics were. The two tails of the distribution of wealth were denser for 1458, while the wealth of the central deciles (from around 40^th to 79^th percentiles) was more concentrated in the distribution of 1480. Thus, given the higher sensibility of the Gini index at the middle of the distribution than at the tails, the result is a lower value of the 1480 index, as already shown in Table 7 and Table 8.

22 Vivanti (2005).

0 50000 100000 150000 200000 250000

1 2 3 4 5 6 7 8 9 10

1458

0 50000 100000 150000 200000 250000

1 2 3 4 5 6 7 8 9 10

1480

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Table 9 – Distribution of gross wealth (in florins) by deciles of households, 1458 and 1480

1458 1480

Decile Gross Wealth (florins)

Share of Wealth (%)

Gross Wealth (florins)

Share of Wealth (%)

1 0 0.00 0 0.00

2 1591 0.31 92 0.02

3 7038 1.36 4560 1.20

4 12711 2.45 10383 2.74

5 19740 3.81 16419 4.33

6 29627 5.72 23486 6.19

7 43405 8.38 33845 8.92

8 63260 12.22 47771 12.59

9 100851 19.47 70741 18.65

10 239657 46.28 172072 45.36

Total 517880 100 379369 100

Figure 6 – Distribution of gross wealth (as %) by deciles of population, 1458 and 1480

For 1458 and 1480 we do not have the number of members of each household, so we are unable to compute the equivalent gross and net wealth. Checking only the non-equivalent

0 5 10 15 20 25 30 35 40 45 50

1 2 3 4 5 6 7 8 9 10

% of wealth

Deciles of Population 1458 1480

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wealth, we can say that inequality fell between 1427 and 1458, while it remained roughly constant between 1458 and 1480 (as said, however, the downward trend does not disappear).

The inequality in the distribution of wealth in the city of Florence (Table 10) has substantially waned over the whole period considered.

Table 10 – Dynamics of Gini index for the city of Florence, gross non-equivalent wealth

1427 1458 1480 ∆1427-

1458

∆1458- 1480

∆1427- 1480

Gini index 0.786 0.642 0.632 -0.144 -0.010 -0.154

A clear relationship between the decrease in wealth inequality and that in the disposable wealth exists, as represented in Table 11. It is not clear to us, however, what the transmission channel is: we leave it to future research to answer the question if it is the decrease in wealth that caused the decrease in the inequality of distribution, or the opposite way round.

Table 11 – Percentage changes in wealth and inequality, Florence

Years ∆ Wealth (%) ∆ Gini (%)

1427-1458 -33.0 -18.4

1458-1480 -33.8 -1.6

1427-1480 -55.7 -19.7

Thanks to the Lorenz curve we can graphically understand the inequality level and its dynamics over time. In Figure 7 the curves for the city of Florence are superimposed for each of the years considered.

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Figure 7 – Lorenz Curves for the city of Florence. 1427, 1458 and 1480

This latter figure is probably the one that better explains the fall in inequality that occurs in the half-century considered. In the next two sections we provide some explanations for the above mentioned variation in inequality.

3.4 The Correlation between Population, Wealth and Inequality

The correlation between the average wealth of a society and its level of inequality is well established. The Inequality Possibility Frontier (IPF) introduced by Milanovic, Lindert and Williamson (2011) is a measure that connects the average level of income (of which wealth is a proxy), expressed as a multiple of the subsistence one, and the maximum inequality that can be reached by the society. Simply speaking, the IPF is a measure that assumes that the richer class of a society has the ability to appropriate all of the surplus produced and, thus, is a measure that reports the maximum attainable value of inequality under the above assumptions (see Milanovic, Lindert and Williamson, 2011, for further details).

0 0,2 0,4 0,6 0,8 1

Cumulative gross wealth

Cumulative population proportion

1458 1480 1427

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The surplus produced in a society is, however, not independent from the size of the population: if the average productivity of the workers is greater than the one that leads to the subsistence income, every additional worker above a given threshold will increase the surplus and thus the inequality. Alfani and Ammannati (2017) also found that the inequality of wealth distribution was higher in the larger Tuscan centers than in the smaller ones, and Herlihy and Klapisch-Zuber (1988) compute a Gini index higher for Florence than for every other city.

The population size and the average wealth are, therefore, highly correlated with the inequality level. Figure 8 represents the dynamics of the population, the Gini index and the gross per household wealth for Florence along the years considered. The variables were re- scaled in order to be represented on the same graph.

Figure 8 – Dynamics of the population, Gini index and wealth. Florence 1427, 1458 and 1480

Unfortunately, we have just three years of observations. Still, the figure suggests that the inequality dynamics is related both to the population and to the gross wealth. The Gini index is actually decreasing when wealth is decreasing and the population remains stable, and this pattern starts to reverse (as a matter of fact, we see a slower decline) when the population growth becomes positive.

1420 1430 1440 1450 1460 1470 1480 1490

Population Gini Index Gross Wealth

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Alfani and Ammannati (2017) found that the inequality in the Florentine domains was characterized by a growing trend from around the fourteenth to the nineteenth century, with the important interruption of the post Black Death period (from 1348 to around the middle of fifteenth century), where the inequality has shown a stagnating or even negative growth. This decline of inequality is also supported by Herlihy (1977): “Wages, for example, increased by three or four times between 1344 and 1415, as the Florentine population was falling by more than half."²³

The link between catastrophic events (among which the Black Death was surely one of the most important) and the movements towards equality is well established²⁴. The mechanism, for an almost-rural society, is that low wage workers die (or are unable to work because of wars, pestilences or similar), forcing the economy to pay more for the now scarce production resources.

The results of the present research seem to confirm that the inequality was falling during the fifteenth century: the already discussed Figure 8 and Table 11 reports the negative changes of the Gini index of the gross, non-equivalent wealth of the city of Florence for the time span considered.

Even if these results, as said, appear to confirm the hypothesis of the long lasting effects of the Black Death, the period considered does not allow us to infer a clear relationship between the epidemic of 1348/49 and the downward trend of inequality in the subsequent century. With respect to Florence, the decline in inequality, between 1427 and 1458 in particular, appears too pronounced (0.144) to be imputed to an event occurred a century before. It is clear, however, that the results here reported refer to the capital city, therefore a particular case, the results of which are difficult to be generalized to include the rest of the State.

23 Herlihy (1977), p. 159.

24 One of the most influencial book on this topic is Scheidel (2017).

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4. Verona

4.1 Historical and Social Context

We have evidence of the existence of the city of Verona as early as the Neolithic (fourth millennium BCE). It is, however, from the third century BCE that the city experienced a period of great expansion and development, as a result of the strengthening of relations with Rome. The fall of the Roman Empire marked the beginning, as for almost all other Italian cities, of a chaotic period, which saw a succession of various foreign dominations (it became the capital of the Goths, the Ostrogoths and Longobards, albeit for a short time, then it encountered the domination of the Byzantine and Carolingian dynasty). From the eleventh century, but especially during the twelfth, the city of Verona started to struggle, aiming to free itself from foreign domination. The free communal period started in 1136, that was the year of the election of the first consuls and the birth of the municipality. In the communal period, as in Florence, the internal struggles between Guelph and Ghibellines took place, culminating in the establishment of a "perpetual general captain of the people" in the figure of Mastino della Scala (1262), an event that marked the beginning of the Signoria Scaligera. During this time, and particularly with Cangrande della Scala (1291-1329), the arts flourished and a great

"renaissance" development occurred, as well as a considerable military initiative, which led to the maximal territorial expansion in 1336. At the end of the fourteenth century, a series of internal struggles for supremacy and the growing power of the Visconti, the Este and the Gonzaga led to the fall of the Signoria Scaligera. From 1388 to 1402 Verona was dominated by the Visconti of Milan, from 1402 to 1405 there was the brief period of the Carraresi and from this date the city fell under the domination of the Doges of Venice, who held control until the Italian Campaign of Napoleon in 1796²⁵.

After the Venetian conquest, the new rulers began an investigation campaign, both on land and physical capital and on the population, that would allow the application of the tax system to new subjects of the Republic. In particular Venice was in need of a register containing the necessary information to impose taxes on income and wealth. Furthermore, the Republic wanted the harmonization of the fiscal system of the new dominion with its own that

25 For the history of the city of Verona, see Herlihy (1973), Tagliaferri (1966 and 1972) and Vivanti (2005).

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was, as already said, at the edge of good governance. This investigation materializes in the Estimi ("Abecedatus extimi Communis Verone")²⁶, i.e. documents collected from 1409 and up to 1635, drawn up and updated every 10 years or so, for a total of 24 volumes. The subjects investigated by these estimi were the "cives", or those who lived in Verona in a stable manner for at least two-thirds of the year, including even those who had permanent residence in the countryside and owned real estate in the territory but had maintained the rights of citizenship in Verona. Furthermore, the Campioni d’Estimo²⁷ was not collected in florins (as in Florence), neither in any other contemporaneous currency: the measuring unit was the soldo d’estimo, i.e. a fictive measure of the ability of the household to support the tax burden. As in Florence, there were also some deductions for Verona, but in this case they were simply applied if the declared income of a breadwinner did not reach the threshold deemed necessary for survival (threshold arbitrarily changed by the city council). After the “Aestimatores” had completed the survey on wealth, the rulers declared a tax rate, equal for all and not progressive.

Tagliaferri (1966) states that the estimi of Verona had the characteristics of universality (aimed at all citizens), transparency (the results were made public in the presence of the Council and the Rectors), justice (each cives had a figure of tax that was always proportional to its wealth), reliability and completeness. Even for modern observers Verona may appear less unequal than Florence, if we consider that the taxation system of the latter, at least as shown in our previous analysis, was regressive (the Gini index of the gross distribution of wealth was lower than the after deductions distribution for each year).

The population of Verona was around 15 thousand inhabitants²⁸ in 1425. In 1502 around 7 thousand households were surveyed in the Estimo, which gives us a figure for the inhabitants of the city of Verona at the beginning of the sixteenth century of around 42 thousand. From this number it is clear that the second half of the fifteenth century was a very brilliant period of peace for the city of Verona, as can also be testified by the numerous renaissance buildings of those years (Tagliaferri, 1966).

Thanks to the database we are using, it is possible to identify the most numerous categories of workers in the city of Verona, even if for around 30% of them we do not know

26 Tagliaferri (1966).

27 As already said, a Campione d’Estimo is the name for both a preparatory phase (in the case of Verona, when the committee proposed the investigation results to the city council) and the final result of the actual Estimo (particularly, after the public proclamation of the register by the city council).

28 See Herlihy (1973). For 1425, however, Tagliaferri (1966) suggest a city population of around 20,000.

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their occupation. The most represented industry was the textile one: 29% of the workforce was in fact occupied in it; the industries and the marketing of wool were those that occupied more employees (478 out of a total of the textile sector of 847) and if we add to them the sartor (tailors), in number of 86, we see how modest the productions of other types of tissues were (silk industry 19 workers, 32 in linen and 10 in leather). The small number of workers in the production and processing of silk in that period is not surprising, considering the competition that merchants of Verona faced for the same productions in Venice and Bologna, and the opposition of the agricultural and industrial sectors (firstly because of the cultivation of the mulberry tree, and secondly because of the relative strength of the wool industry) (Tagliaferri, 1966). Among the other occupations, the most common were: faber or blacksmith (47), aurifex or goldsmith (16), marangonus or carpenter (68), cerdo or shoemaker (125) and pelliparius or trapper (57). The most represented occupation was, however, the manovale: 202 “urban labourer not further identified as to occupation” (Census and Property Survey for Florentine Domains and the City of Verona in Fifteenth Century Italy, Appendix).

4.2 Inequality Measures

Because of the partial availability of data for Verona, we cannot say much about the general economy of the city. It is possible, however, to compute a cross sectional measure of inequality (the two years considered are 1425 and 1502) and to investigate the time dynamics of inequality, because the spatial distribution of the households is similar in the two years considered. Table 12 presents some important descriptive statistics of the Veronese data.

Table 12 – Descriptive statistics for the city of Verona, 1425 and 1502

Location Frequency Percentage Average gross wealth

(soldi d’estimo)

Verona 1425 998 34.2 16.61

Verona 1502 1,920 65.8 14.09

Total 2,918 100.0 14.95

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The distribution of wealth for the city of Verona in 1425 was more equal than that of Florence: out of a total of 16,578 soldi d’estimo the richer 10% held 8,459 (51.1%), while the very top 1% possessed a wealth equivalent to 3,130 soldi (about 18.9%). The average wealth was 16.6 soldi and only a few households (5) were registered with a null property. As in Florence, this figure comprehends the whole of the population (remember the characteristic of universality of the Estimi), and therefore also the propertyless. The inequality measures for Verona in 1425 are presented in Table 13.

Table 13 – Inequality Measures (not divided by the equivalence scale), Verona 1425

Inequality measures Total value of assets

Gini coefficient 0.526

Relative mean deviation 0.426

Coefficient of variation 2.212

Standard deviation of logs 0.729

Theil index (GE(a), a = 1) 0.761

Mean Log Deviation (GE(a), a = 0) 0.482

Entropy index (GE(a), a = -1) 0.465

Half (Coeff.Var. squared) (GE(a), a = 2) 2.444

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Figure 9 – Lorenz curve for the city of Verona, 1425

Figure 9 presents the Lorenz curve of the distribution of the gross wealth of Verona in 1425. We are unable to depict both the equivalent wealth and the net wealth, since, as said, the unit of measurement is the soldi d’estimo: a fictive measure of the ability of the household to pay taxes (thus, by definition, gross).

It is immediately clear that the distribution of wealth in the city of Verona in 1425 was more equal than that of the city of Florence (in each of the years considered). Again, it could be useful to divide the Veronese society into wealth classes. The distribution of wealth by deciles of households is represented in Table 14 and Figure 10.

UNIVERSITÀ DEGLI STUDI DI MODENA E REGGIO EMILIA