Wealth Accumulation and Institutional Capture: the Rise of the Medici and the Fall of the Florentine Republic
We study the rise of the Medici family and the fall of the Florentine Republic in the 15th century. In this period, political offices were assigned by a system which combined elections and selection by lot. During the 1430s, the Medici family increased its influence and de facto captured the system of office allocation while leaving the political institutions formally unchanged. We use data on the results of the drawings for the three main government offices of the city between 1395 and 1457 and match them with data on individual wealth at different points in time in the 15th century. Our results document that, after the Medici’s institutional soft-capture, holding a political office is strongly and directly associated with individual wealth accumulation, especially for office holders from the Medici’s faction. By contrast, we find a very limited effect between the number of terms in office and individual wealth before the rise of the Medici to political power. By comparing results for the two periods, before and after the institutional capture, and using complementary data sources, we provide several pieces of evidence that explain our findings in terms of collusion and rent extraction.