The Impact of the Reformation on the Economic Development of Western Europe

Sheremeta, Roman and Smith, Vernon (2017): The Impact of the Reformation on the Economic Development of Western Europe.

Abstract

The Protestant Reformation is a vivid example of how religious transformation could set in motion institutional changes, leading to profound consequences for economic and political development. Although economists and other social scientists agree that there is a strong relation between the Reformation and economic growth, there is an active discussion as to what are the causal pathways connecting Protestantism to long-run economic success. We discuss the causal pathways that received substantial empirical support in academic literature. Some of them, such as “work ethic” and entrepreneurial spirit of Protestants, were originally suggested by Max Weber, while others, such as religious freedom and education, are deeply grounded in economic theory. More recently, other causal pathways have been suggested, such as social ethic, civil society, and institutional changes. We bring our view of these pathways.

• Item Type: MPRA Paper
• Language: English
• Keywords: Reformation, religion, economic development
• Subjects: A - General Economics and Teaching > A1 - General Economics > A13 - Relation of Economics to Social Values; B - History of Economic Thought, Methodology, and Heterodox Approaches > B1 - History of Economic Thought through 1925 > B15 - Historical ; Institutional ; Evolutionary; E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z12 - Religion

References

Algan, Y., & Cahuc, P. (2013). Trust and growth. Annual Review of Economics. 5, 521-549.

Allen, R.C. (2001). The great divergence in European wages and prices from the middle Ages to the First World War. Explorations in Economic History, 38, 411-447.

Amos, G.T. (1989). Defending the Declaration: How the Bible and Christianity influenced the writing of the Declaration of Independence. Wolgemuth & Hyatt.

Anheier, H.K. (1989). Private voluntary organizations and development in West Africa: Comparative perspectives. In Jeames, E., (Ed.), The nonprofit sector in international perspective, New York: Oxford University Press, pp. 337-57.

Anheier, H.K., & Salamon, L.M. (1998). The nonprofit sector in the developing world: A comparative analysis. Manchester, England: Manchester University Press.

Arrow, K. J. (1974). General economic equilibrium: purpose, analytic techniques, collective choice. American Economic Review, 64, 253-272.

Arrunada, B. (2010). Protestants and Catholics: Similar work ethic, different social ethic. Economic Journal, 120, 890-918.

Bai, Y., & Kung, J.K. (2015). Diffusing knowledge while spreading God's message: Protestantism and Economic prosperity in China, 1840-1920. Journal of the European Economic Association, 13, 669-698.

Bainton, R.H. (1950). Here I stand: A life of Martin Luther. Abingdon Press, New York.

Barro, R., & McCleary, R.M. (2003). Religion and economic growth across countries. American Sociological Review, 68, 760-781.

Barro, R.J. (1991). Economic growth in a cross section of countries. Quarterly Journal of Economics, 106, 407-443.

Basten, C., & Betz, F. (2013). Beyond work ethic: Religion, individual, and political preferences. American Economic Journal: Economic Policy, 5, 67-91.

Becker, S.O., & Woessmann, L. (2008). Luther and the girls: Religious denomination and the female education gap in nineteenth‐century Prussia. Scandinavian Journal of Economics, 110, 777-805.

Becker, S.O., & Woessmann, L. (2009). Was Weber wrong? A human capital theory of Protestant economic history. Quarterly Journal of Economics, 124, 531-596.

Becker, S.O., Pfaff, S., & Rubin, J. (2016). Causes and consequences of the Protestant Reformation. Explorations in Economic History, forthcoming.

Berman, H. (2003). Law and revolution, II: The impact of the protestant Reformations on the Western legal tradition. Harvard.

Bjornskov, C. (2007). Determinants of generalized trust: A cross-country comparison. Public Choice, 130, 1-21.

Blum, U. & Dudley, L. (2001). Religion and economic growth: was Weber right? Journal of Evolutionary Economics, 11, 207-230.

Boppart, T., Falkinger, J., Grossmann, V., Woitek, U., & Wüthrich, G. (2013). Under which conditions does religion affect educational outcomes? Explorations in Economic History, 50, 242-266.

Bresiger, G. (2014). Millions of Americans skipping lunch to work: study. New York Post, February, 2.

Burnham, T., McCabe, K., & Smith, V.L. (2000). Friend-or-foe intentionality priming in an extensive form trust game. Journal of Economic Behavior & Organization, 43, 57-73.

Card, D. (1999). The causal effect of education on earnings. In. Ashenfelter, O., & Card, D., (Eds.), Handbook of labor economics. Amsterdam: North Holland, pp. 1801-1863.

Chen, Y., Wang, H., & Yan, S. (2014). The long-term effects of Protestant activities in China. Working paper, available at SSRN 2186818.

Clark, J.B. (1899). The distribution of wealth. New York and London: MacMillan.

Cook, K.S., Hardin,R., & Levi, M. (2005). Cooperation without trust? Russell Sage Foundation.

Cuervo, A. (2005). Individual and environmental determinants of entrepreneurship. International Entrepreneurship and Management Journal, 1, 293-311.

Curtis, J.E., Baer, D.E., & Grabb, E.G. (2001). Nations of joiners: Explaining voluntary association membership in democratic societies. American Sociological Review, 66, 783-805.

De Tocqueville, A. (2000 [1835]). Democracy in America. In Mansfield, H.C., & Winthrop, D., (Eds.), Chicago: University of Chicago Press.

Dechenaux, E., Kovenock, D., & Sheremeta, R. M. (2015). A survey of experimental research on contests, all-pay auctions and tournaments. Experimental Economics, 18, 609-669.

Delhey, J., & Newton, K. (2005). Predicting cross-national levels of social trust: Global pattern or Nordic exceptionalism? European Sociological Review, 21, 311-327.

Deol, H. (2000). Religion and nationalism in India: The case of the Punjab. London: Routledge.

Ekelund, R., Hebert, R.F., & Tollison, R.D. (2006). The marketplace of Christianity. Cambridge, MA: MIT Press.

Ekelund, R.B., Jr., Hebert, R.F., & Tollison, R.D. (2006). The market for Christianity, Cambridge, MA: MIT Press.

Fama, E.F. (1970). Efficient capital markets: A review of theory and empirical work. Journal of Finance, 25, 383-417.

Ferguson, N. (2003). The world; Why America outpaces Europe (clue: The God factor). The New York Times, June, 8.

Fukuyama, F. (2001). Social capital, civil society and development. Third World Quarterly, 22, 7-20.

Gallego, F.A., & Woodberry, R. (2010). Christian missionaries and education in former African colonies: How competition mattered. Journal of African Economies, 19, 294-329.

Gill, A. (1998). Rendering unto Caesar: the Catholic Church and the state in Latin America, Chicago.

Glaeser, E.L., Laibson, D.I., Scheinkman, J.A., & Soutter, C.L. (2000). Measuring trust. Quarterly Journal of Economics, 115, 811-846.

Grim, B.J., & Finke, R. (2011). The price of freedom denied. New York: Cambridge University Press.

Guiso, L., Sapienza, P., & Zingales, L. (2003). People's opium? Religion and economic attitudes. Journal of Monetary Economics, 50, 225-282.

Hanushek, E.A. (2016). Will more higher education improve economic growth? Oxford Review of Economic Policy, 32, 538-552.

Hanushek, E.A., & Kimko, D.D. (2000). Schooling, labor force quality, and the growth of nations. American Economic Review, 90, 1184-1208.

Hanushek, E.A., & Woessmann, L. (2010) Education and economic growth. International Encyclopedia of Education, 2, 245-252.

Hanushek, E.A., & Woessmann, L. (2012). Do better schools lead to more growth? Cognitive skills, economic outcomes, and causation. Journal of Economic Growth, 17, 267-321.

Hayek, F.A. (1937). Economics and knowledge. Economica, 4, 33-54.

Inglehart, R. (1999). Trust, well-being and democracy. In Warren, M. (Ed.), Democracy and trust, New York and Cambridge UK: Cambridge University Press, pp. 88-120.

James, E. (1986). The private nonprofit provision of education: a theoretical model and application to Japan. Journal of Comparative Economics, 10, 255-276.

James, E. (1989). The nonprofit sector in developing countries: The case of Sri Lanka. In The Nonprofit Sector in International Perspective, New York: Oxford University Press, pp. 289-318.

Knack, S., & Keefer, P. (1997). Does social capital have an economic payoff? A cross-country investigation. Quarterly Journal of Economics, 112, 1251-1288.

Krueger, A.O. (1974). The political economy of the rent-seeking society. American Economic Review, 64, 291-303.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R.W. (1997). Trust in large organizations. American Economic Review, 87, 333-338.

Lam, P.Y. (2002). As the flocks gather: How religion affects voluntary association participation. Journal for the Scientific Study of Religion. 41, 405-422.

Lambert, F.T. (2003). The Founding Fathers and the place of religion in America. Princeton, NJ: Princeton University Press.

Lucas, R.E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3-42.

Mankiw, N.G., Romer, D., & Weil, D. (1992). A contribution to the empirics of economic growth. Quarterly Journal of Economics, 107, 407-437.

Mantovanelli, F.G. (2014). The Protestant legacy: Missions and literacy in India. Working paper, available at SSRN 2413170.

Martinussen, J. (2015). Society, state and market: A guide to competing theories of development. HSRC Publishers.

Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics, 110, 681-712.

McCarter, M.W., & Sheremeta, R.M. (2013). You can’t put old wine in new bottles: The effect of newcomers on coordination in groups. PLOS ONE, 8, 1-9.

McCleary, R.M. (2013). Protestantism and human capital in Guatemala and the republic of Korea. Working paper, available at SSRN 2239556.

McCloskey, D. (2010). Bourgeois dignity: Why economics can’t explain the modern world. University of Chicago Press, Chicago.

Miller, K.D. (2002). Competitive strategies of religious organizations. Strategic Management Journal, 23, 435-456.

Mills, G. (2013). Working hours in Spain are too long. The Local, July, 4.

Moretti, E. (2004). Workers' education, spillovers, and productivity: evidence from plant-level production functions. American Economic Review, 94, 656-690.

Nexon, D. (2009). The struggle for power in early modern Europe: Religious conflict, dynastic empires, and international change. Princeton University Press.

Norris, P., & Inglehart, R. (2004). Sacred and secular: Religion and politics worldwide. Cambridge University Press, New York.

North, C.M., Orman, W.H., & Gwin, C.R. (2013). Religion, corruption, and the rule of law. Journal of Money, Credit and Banking, 45, 757-779.

Nunziata, L., & Rocco, L. (2014), The Protestant ethic and entrepreneurship: Evidence from religious minorities from the former Holy Roman Empire. Working Paper.

Nunziata, L., & Rocco, L. (2016). A tale of minorities: Evidence on religious ethics and entrepreneurship. Journal of Economic Growth, 21, 189-224.

Oberman, H.A. (1989). Luther: Man between God and the devil. Translated by Eileen Walliser-Schwarzbart. New Haven: Yale University Press.

Oreopoulos, P., & Salvanes, K.G. (2011). Priceless: The nonpecuniary benefits of schooling. Journal of Economic Perspectives, 25, 159-184.

Parker, S. (2005). The economics of entrepreneurship: What we know and what we don’t. Foundations and Trends in Entrepreneurship, 1, 1-54.

Pongsapich, A. (1998). The nonprofit sector in Thailand. In Anheier, H.K., & Salamon, L., (Eds.), The nonprofit sector in the developing world, Manchester: Manchester University Press, pp. 294-347.

Putnam, R.D. (1993). Making democracy work: Civic traditions in modern Italy. Princeton University Press, Princeton.

Rietveld, C.A., & Van Burg, E. (2014). Religious beliefs and entrepreneurship among Dutch Protestants. International Journal of Entrepreneurship and Small Business, 23, 279-295.

Rietz, T.A., Sheremeta, R.M., Shields, T.W., & Smith, V.L. (2013). Transparency, efficiency and the distribution of economic welfare in pass-through investment trust games. Journal of Economic Behavior & Organization, 94, 257-267.

Romer, P. (1990). Endogenous technological change. Journal of Political Economy, 99, 71-102.

Rubin, J. (2017). Rulers, religion, and riches: Why the West got rich and the Middle East did not. Cambridge University Press.

Samuelsson, K. (1957). Religion and economic action: A critique of Max Weber. Toronto: University of Toronto Press.

Schniter, E., Sheremeta, R.M., & Sznycer, D. (2013). Building and rebuilding trust with promises and apologies. Journal of Economic Behavior and Organization, 94, 242-256.

Schumpeter, J.A. (1942). Socialism, capitalism and democracy. New York: Harper and Brothers

Sheremeta, R.M. (2013). Overbidding and heterogeneous behavior in contest experiments. Journal of Economic Surveys, 27, 491-514.

Sheremeta, R.M. (2015). Behavioral dimensions of contests. In Congleton, R.D., & Hillman, A.L., (Eds.), Companion to political economy of rent seeking, London: Edward Elgar, pp. 150-164.

Sheremeta, R.M. (2016). Impulsive behavior in competition: Testing theories of overbidding in rent-seeking contests. Working Paper, available at SSRN 2676419.

Smith, V.L. (1962). An experimental study of competitive market behavior. Journal of Political Economy, 70, 111-137.

Solow, R.M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70, 65-94.

Spenkuch, J.L. (2016). The protestant ethic and work: Micro evidence from contemporary Germany. Working paper, available at SSRN 1722044.

Stamatov, P. (2010). Activist religion, empire, and the emergence of long-distance advocacy networks. American Sociological Review, 75, 607-628.

Stark, R., & Iannaccone, L.R. (1994). A supply-side reinterpretation of the" secularization" of Europe. Journal for the Scientific Study of Religion, 33, 230-252.

Stulz, R.M., & Williamson, R. (2003). Culture, openness, and finance. Journal of Financial Economics, 70, 313-349.

Tabellini, G. (2010). Culture and institutions: Economic development in the regions of Europe. Journal of the European Economic Association, 8, 677-716.

Treisman, D. (2000). The causes of corruption: A cross-national study. Journal of Public Economics, 76, 399-457.

Tullock, G. (1980). Efficient rent seeking. In Buchanan, J.M., Tollison, R.D., & Tullock, G., (Eds.), Toward a theory of the rent-seeking society. College Station, TX: Texas A&M University Press, pp. 97-112.

Uslaner, E.M. (2002). The moral foundations of trust. Cambridge University Press, Cambridge, UK.

Van der Veer, P. (2001). Imperial encounters: Religion and modernity in India and Britain. Princeton, NJ: Princeton University Press.

Van Hoorn, A., & Maseland, R. (2013). Does a Protestant work ethic exist? Evidence from the well-being effect of unemployment. Journal of Economic Behavior & Organization, 91, 1-12.

Weber, M. (1905, 2002). The protestant ethic and the ‘spirit’ of capitalism. New York: Penguin.

Wills, G. (1979). Inventing America: Jefferson's Declaration of Independence. New York: Vintage Books.

Witte, J. (2002). Law and Protestantism: The legal teachings of the Lutheran Reformation. Cambridge University Press.

Woodberry, R.D. (2004). The shadow of empire: Christian missions, colonial policy, and democracy in post colonial societies. PhD dissertation, University of North Carolina at Chapel Hill.

Woodberry, R.D. (2012). The missionary roots of liberal democracy. American Political Science Review, 106, 244-274.

Zak, P.J., & Knack, S. (2001). Trust and growth. Economic Journal, 111, 295-321.