Do universities contribute to long run development?

The short answer may be yes.

We’ve been talking about the Industrial Revolution the past week, so we may as well go even earlier “Commercial Revolution”, the years from 1000 to 1500 (or so) when Europe awoke from its torpor and both cities and trade began to grow.

Davide Cantoni and Noam Yuchtman test whether medieval universities played any role, looking at the foundation of Germany’s first universities after 1386.

We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most.

…Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity.

NBER paper here. Earlier ungated paper here.