7 - Exogenous Increase of Human Capital

Summary

A positive shock to a society’s supply of human capital can come from exogenous and unanticipated immigration. One such case arose from Louis XIV’s precipitous revocation of the Edict of Nantes, which forced French Calvinists – Huguenots – to convert or to flee. Many fled to the Protestant regions of Germany, where – owing to the Huguenots’ renowned expertise and entrepreneurship – they contributed greatly to subsequent economic development. Only some of Germany’s many Protestant cities, however, welcomed the refugees. Analysis of sixty cities’ attitudes contradicts the idea that powerful guilds opposed, or that pre-existing human capital favored, the admission of the Huguenots. Rather, a city was likelier to welcome them the closer it lay to a major trade route, or the more of its population it had lost in the Thirty Years’ War. Territorial rulers almost unanimously welcomed the Huguenots and often compelled reluctant cities to admit them. Animated by the ideas of Seckendorff, rulers saw in the Huguenots both a welcome influx of human capital and a way to undermine the craft guilds, which Seckendorff regarded as a major impediment to economic growth.