The Feudal Origins of Economic Prosperity: Evidence from Medieval Sicily

This paper investigates the short- and long-run determinants of economic prosperity, tracing its origin to the feudal organization of the Middle Ages. Using newly coded data recording different feudal arrangements in the 13th and 14th century Sicily, and a repeated-cross section event-study design, we show that municipalities subject to stable feudal control by local lords exhibit worse economic outcomes than those that were repossessed and administered directly by the Crown for a period of time. This relationship is statistically significant for measures of economic prosperity in the medieval period — such as population and municipal rents — and for contemporary economic outcomes. We interpret these findings through the lens of a principal–agent framework, in which the interaction between the Crown and feudal lords is characterized by information asymmetries. Repossession by the Crown temporarily mitigates these informational frictions, limiting rent extraction and creating scope for the provision of public goods, with persistent effects on local development.