Legal Pluralism, Contracts, and Trade in the Ottoman Empire Cihan Artunç⇤ Job Market Paper November 15, 2013 Abstract Throughout the eighteenth and nineteenth centuries, non-Muslim Ottomans paid large sums to acquire access to European law. These protégés came to dominate Ottoman trade and pushed Muslims and Europeans out of commerce. At the same time, the Ottoman firm remained primarily a small, family enterprise. The literature argues that Islamic law is the culprit. However, adopting European law failed to improve economic outcomes. This paper shows that the co-existence of multiple legal systems, “legal pluralism,” explains key questions in Ottoman economic history. I develop a bilateral trade model with multiple legal systems and first show that legal pluralism leads to underinvestment by creating enforcement uncertainty. Second, there is an option value of additional legal systems, explaining why non-Muslim Ottomans sought to acquire access to European law. Third, in a competitive market where a subpopulation has access to additional legal systems, agents who have access to fewer jurisdictions exit the market. Thus, forum shopping explains protégés’ dominance in trade. Finally, the paper explains why the introduction of the French commercial code in 1850 failed to reverse these outcomes. ⇤Yale University, Department of Economics. E-mail:
[email protected]. Website: https://sites.google.com/site/cihanartunc/. I am deeply grateful to Timothy Guinnane, Naomi Lamoreaux, and Larry Samuelson for their generous guidance, insights, and support. I thank Seven Ağır, Shameel Ahmad, Amanda Gregg, Kıvanç Karaman, Timur Kuran, Sheilagh Ogilvie, Şevket Pamuk, Jean-Laurent Rosenthal, Gabriella Santangelo, Jakob Schneebacher, Francesca Trivellato, and seminar participants at Yale University’s Economic History Workshop.