Religion and Development

It is almost self-evident that religion affects economic growth and development. Even in societies where most people do not consider themselves religious, the religious past has shaped societal norms, institutions, fertility, education, politics, and much more. The questions that social scientists must grapple with is how has religion affected development, both in the past and the present? What are the mechanisms—both historical and contemporary—that link religion and religious beliefs to economic development?

These are big questions, and a literature has emerged in the last decade in economics and political science that attempts to address the many linkages connecting religion and economic development. In a recent paper (prepared for the Handbook of Culture and Economic Behavior) with Sascha Becker, Amma Panin, and Steven Pfaff, we attempt to make sense of this literature. This leads us to consider the connection between religion and economic/political outcomes in the past, that same connection in the developing world in the present, and what the future may hold for these relationships.

Let’s start with the past—how religious institutions, norms, and events in the past have exerted long-lasting influences on economic outcomes. There are two major avenues through which past religious phenomena are still with us. One is through “persistence”. In the social sciences more generally, persistence studies have shown that all sort of cultural and economic phenomena impact present-day outcomes. This is equally true of religion. Various studies have shown that historical religious phenomena still impact work effort and thrift, human capital accumulation, impersonal prosociality, access to banking and financial institutions, persecution, interethnic cooperation, and much more.

A second connection linking past religious phenomena with modern development is the spread of new religions. There is now a relatively large literature on the various mechanisms that facilitated the spread of the Protestant Reformation, and there is a smaller but important literature addressing the spread of early Islam and conversion into Islam. Just as important from the perspective of modern-day development is the spread of Pentecostal Christianity, which is rapidly gaining followers in sub-Saharan Africa and Latin America. Due to both successful proselytization and demographic trends, Pentecostal denominations may become the largest in all of Christianity.

We of course want to go deeper than simply stating that religious phenomena from the past tend to persist. We want to understand why they persist. For this, we must go beyond persistence shown in any one study and try to pull out general insights into why religious phenomena persist. Several mechanisms have been suggested by the literature. One is cultural transmission, the process by which religious beliefs and practices are passed down through generations. Within economics, this mechanism is most associated with the theoretical work of Bisin and Verdier, and it has been used to address issues including religious assimilation, the “spirit” of entrepreneurship, religious and cultural revivals, persistent use of religious legitimacy, and much more.

Another important set of mechanisms are institutions and political economy. In most major world religions, religious organizations and their relationship with political structures can either entrench or alter religious influence. An important reason is that religions and religious authorities are particularly adept at legitimating rule. In many faiths, the very source of the power held by religious authorities is their direct connection to the otherworldly—a connection not held by other members of society. This relationship between religious and political authorities has been particularly strong in Muslim and Christian histories, which has yielded significant political power to religious authorities when and where religious legitimacy was important. It also affected tax collection, the use of religious courts, Islamist political parties, European state formation, and much more.

A third mechanism linking past religious phenomena to modern outcomes is networks. Social connections and relationships can foster the spread and maintenance of religious phenomena, thus making it a potent mechanism of persistence. For instance, network complexity has been shown to play a role in the rise of Christianity in the Greco-Roman world, and Martin Luther’s network has been shown to have played a key role in the facilitating the spread of the Reformation.

Religion does not just impact economic development via historical channels. There are several contemporary phenomena in which these connections are crucial. One is secularization. There has long been discourse on the “secularization hypothesis”—the idea that that capitalist development erodes the unity between faith and society and with it the plausibility of religion, the intensity of religious sentiments, and the authority of religious institutions.

Yet, secularization appears not to be happening in the developing world even as it becomes richer. In many parts of the developing world, some degree of development does not lead simply to secularization but to shifts in religious affiliations and variations in religious intensity. There are a variety of reasons why this may be the case, including the “losers” from development turning towards religion (especially Pentecostalism), exposure to trade shocks affecting vote shares for religious candidates, cash transfers permitting greater Church attendance, religious institutions providing social insurance for parishioners, and much more.

This short post has meant to highlight the idea that not only is religion far from dead, it has a massive impact on the process of economic development both in the past and the present. Some forms of Christianity (and to a lesser extent, Islam) are rapidly growing in some of the places where the development challenges are the greatest. Getting a better grasp of the connection between religion and economic development is surely one of the more important tasks for future social scientists interested in the process of economic development.