Economics of Religion

October 15-16, 2009
Jon Gruber and Daniel Hungerman, Organizers

Erik Meyersson, IIES, Stockholm University
Islamic Rule and the Emancipation of the Poor and Pious

Meyersson estimates the impact of Islamic rule on secular education, comparing elections where an Islamic party barely won or lost municipal mayor seats in Turkey. He finds that municipalities that randomly received an Islamic mayor in 1994 had higher high school attainment in 2000 than secular-run municipalities. Not only is this impact larger for women than for men, but it is also larger when the opposing candidate is from a secular left-wing, rather than a right-wing, party. The impact is also larger both in poorer and more pious areas. Part of this increased participation may come through increased investment in education by religious foundations, by providing education facilities more tailored to religious conservatives. The participation impact of the Islamic party also extends to the labor market. Women are less likely to be classified as housewives, more likely to be employed as wage-earners as opposed to non-salaried family workers. Altogether these findings stand in contrast to the stylized view that more Islamic influence is associated with adverse development outcomes, especially for women. One interpretation is that existing restrictions on religious expression, such as the headscarf ban in public schools, excludes certain groups from participating. Islamic parties may be more effective at mobilizing these groups by accommodating religious conservatives in secular institutions such as high school.

Stelios Michalopoulos, Tufts University; Alireza Naghavi, University of Bologna; and Giovanni Prarolo, University of Bologna
The Economic Origins of Islam: Theory and Evidence

Michalopoulos, Naghavi, and Prarolo examine the economic origins of Islam. Thely demonstrate that Muslim countries, virtual countries, and ethnic groups, exhibit highly unequal regional agricultural endowments. This particular type of geography 1i) determined the economic aspects of the religious doctrine upon which Islam was formed, and 2i) shaped its subsequent economic performance. The theory argues that the unequal distribution of land endowments conferred differential gains from trade across regions, fostering predatory behavior from the poorly endowed ones. In such an environment it was mutually beneficial to institute a system of income redistribution. However, a higher propensity to save by the rich would exacerbate wealth inequality rendering redistribution unsustainable, leading to the demise of the Islamic unity. Consequently, income inequality had to remain within limits for Islam to persist. This was instituted via restrictions on physical capital accumulation. Such rules rendered the investments on public goods, through religious endowments, increasingly attractive. As a result, capital accumulation remained low and wealth inequality bounded. Geography shaped the set of economically relevant religious principles of Islam affecting its economic trajectory in the preindustrial world.

Sascha Becker, University of Munich; and Ludger Woessmann, University of Munich
Dead End: Protestantism and Suicide

In Le suicide, Emile Durkheim (1897) presented aggregate indicators showing that Protestantism was a leading correlate of suicide incidence. Becker and Woessmann extend Gary Becker and Richard Posner's (2004) economic theory of suicide to account for an effect of Protestant versus Catholic denomination, modeling differences in the possibility of confession of sins, in views about the ability of man to affect God's judgment, and in group- versus individually-oriented attitudes. The researchers test the economic theory of religion-specific suicide rates using a unique new dataset capturing the micro-regional variation across 452 counties in 19th-century Prussia. Prussia had substantial denominational variation within a common institutional framework and provides county-level census data on suicide, religion, and covariates at a time when religiousness was still pervasive. As early as 1919, it has been suggested that the higher incidence of suicide among the Protestant population may simply be the result of selection into denominational groups (Kollarits 1919). This establishes a fundamental challenge for empirical identification, and although many sociological studies have confirmed Durkheim's association since, little attention has been given to causal identification. To identify exogenous variation in religious denomination, the authors exploit the fact that Protestantism tended to spread across Prussia in geographically concentric circles around Luther's city of Wittenberg (Becker and Woessmann QJE 2009). Using distance to Wittenberg as an instrument for Protestantism, they find that Protestantism had indeed a significant causal positive effect on suicide both in 1816-21 and in 1868-71.

Murat Iyigun, University of Colorado
Monotheism (From a Sociopolitical & Economic Perspective)

Iyigun presents a dataset that covers 277 human civilizations over the period between 2900 BCE and 1750 CE. Uszing data on the duration and peak land mass of these civilizations, Iyigun shows that societies that adhered to one of the three Abarahamic monotheistic religions had higher survival odds and reigned over larger geographic domains at their peak. Beyond the general impact of adherence to monotheism, Iyigun cannot find any evidence that Judaism, Christianity, or Islam exerted particular effects on the length of reign of civilizations historically. Unlike the results on duration, however, there is some evidence that adherence to a specific religion-Islam-did exert an additional positive impact on geographic domain.

Daniel J. Benjamin, Cornell University and NBER; James J. Choi, Yale University and NBER; and Geoffrey W. Fisher, Cornell University
Religious Identity and Economic Behavior

Benjamin, Choi, and Fisher identify the marginal effect of religious identity on economic choices by measuring how laboratory subjects' choices change when their religious identity is made salient to them. The researchers find that Protestantism increases contributions to public goods, and may increase reciprocity in a labor market gift-exchange game. Catholicism decreases contributions to public goods, increases reciprocity, and decreases risk aversion. Judaism increases reciprocity. There is no evidence of religious identity effects on discount rates or generosity in a dictator game.

Raphael Franck, Bar Ilan University; and Laurence Iannaccone, Chapman University
Why did religiosity decrease in the Western World during the twentieth century?

Franck and Iannaccone analyze the decline in religiosity in the Western World during the twentieth century by using long-run data on church attendance. They test the secularization hypothesis, which argues that economic growth depresses religiosity, and the religion market model, which considers that governmental interventions in religious affairs have an impact on religiosity. Their results provide scant evidence for the secularization hypothesis. They however validate the religion-market model by showing that the growth of the welfare state significantly diminished religiosity. Such findings therefore suggest that many individuals were historically observant because churches offered welfare services which were not provided by the State.

Shawn E. Kantor, UC, Merced and NBER; and Alexander T. Whalley, UC, Merced and NBER
Separating the Roles of Church and State in the Ascendancy of American Higher Education, 1900-1914

Kantor and Whalley examine the channels through which public expenditures affect private activity. They use a unique dataset on individual colleges and universities at the turn of the twentieth century to test whether expansions in publicly-provided higher education affected the private nonsectarian and religious sectors. They consider a specific time in the history of higher education - 1900 to 1914 - when religious higher-education dominated, the public sector was expanding, and it was not clear that higher education would come to be overwhelmingly dominated by public institutions as it is today. To what extent can we attribute the dramatic drop in religious control of higher education to the expansion of the public sector? This paper specifically considers the 1907 Nelson Amendment that expanded funding for each state's land-grant college. Each state received the same amount of money, so identification comes from the fact that each state had a different population and, thus, a different per capita Nelson appropriation. The results indicate that for both the numbers of students and faculty, increased federal spending led to an expansion of public universities and expansions in non-sectarian and religious institutions, although the religious results were not statistically robust. The results suggest that the Nelson Amendment accounted for 4.7 percent of the increase in student enrollment at public colleges and 8.5 percent of the increase at non-sectarian colleges from 1903 to 1914. While the federal government played a relatively small role in the changes in college attendance that swept the country in the early twentieth century, it does not appear that the expansion of public institutions came at the expense of their private counterparts.

Robert Woodberry, University of Texas at Austin
Weber through the Back Door: Protestant Competition, Elite Dispersion and the Global Spread of Democracy

Woodberry explores Protestantism’s inadvertent, historic role in dispersing elites, distributing resources, and developing and spreading democracy. Economic and political elites typically hoard resources and perpetuate class distinction. Conversionary Protestants undermined this social reproduction because they wanted everyone to read the Bible in their own language, decide individually what to believe, and create religious organizations outside state control. Thus, they consistently initiated mass education, mass printing, and civil society, and spurred competitors to copy. Resultant power dispersion altered elite incentives and increased the probability of stable democratic transitions. Woodberry tests his historical arguments statistically through a quasi-natural experiment: the spread of Protestant and Catholic missionaries. Protestant missions account for about half the variation in non-European democracy and remove the influence of the variables that dominate current research. These findings challenge scholars to reformulate theories about cultural and structural influences, economic development and democratization.

Gordon H. Hanson, UC, San Diego and NBER; and Chong Xiang, Purdue University and NBER
Exporting Christianity: Governance and Doctrine in the Globalization of Protestant Denominations

Hanson and Xiang use data from the World Christian Database to examine the factors that affect the expansion of Protestant denominations internationally. Most of the denominations are headquartered in the United States or the United Kingdom. Denominations are more likely to enter countries that are larger, richer, English speaking, formerly colonized by Britain, or closer to their headquarters operations. Controlling for country characteristics, stricter denominations are more likely to be present in a country than less strict ones. Greater public spending on social welfare makes Protestant denominations less likely to be present in a country, with the negative impact being larger for stricter denominations. These results support Iannaccone’s (1992) theory that strictness in religious doctrine enhances the capacity of a group to provide collective goods and services for its members. The authors build a model of competition between denominations based on incomplete contracts and the delegation of authority. Preliminary empirical results support the theory, in that more decentralized denominations, in which pastors have more authority over church operations, are more likely to be present in countries in which the marginal product of pastor effort appears to be higher.

Kaivan Munshi, Brown University and NBER; and Nicholas Wilson, Williams College
Identity, Parochial Institutions, and Occupational Choice: Linking the Past to the Present in The American Midwest

Munshi and Wilson document the presence of non-economic career motivations in the U.S. labor market, explore reasons why such motivations could arise, and provide an explanation for why they might have persisted across many generations. Their analysis links ethnic (migrant) labor market networks in the American Midwest when it was first being settled, the local identity or attachment to place that emerged endogenously to maintain the integrity of these networks, and occupational choice today. While fractionalization may adversely affect the performance of secular institutions, ethnic competition in the labor market could at the same time have strengthened within-group loyalty and parochial institutions. These values and their complementary institutions, notably the church, could have mutually reinforced each other over many overlapping generations, long after the networks themselves had ceased to be salient. Counties with greater ethnic fractionalization in 1860 are indeed associated with steadily increasing participation in select religious denominations historically dominated by the migrants all the way through the twentieth century. Complementing this result, individuals born in high fractionalization counties are significantly less likely to select into geographically mobile professional occupations and, hence, to migrate out of their county of birth, despite the fact that these counties are indistinguishable from low fractionalization counties in terms of local public good provision and economic activity today.

Jay Hartzell, University of Texas at Austin; Christopher Parsons, University of North Carolina; David Yermack, New York University
Is a Higher Calling Enough? Incentive Compensation in the Church

Hartzell, Parsons, and Yermack study the compensation and productivity of more than 2,000 Methodist ministers in a 43-year panel data set. The church appears to use pay-for-performance incentives for its clergy, as their compensation follows a sharing rule by which pastors receive approximately 3 percent of the incremental revenue from membership increases. The elasticity between ministers' pay and parish size is similar to the firm size elasticity of compensation for public company CEOs. Ministers receive especially strong rewards for attracting new parishioners from other congregations within their denomination.

NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us