Economic Consequences of Religion

Something to start with:

"Over the past century, scholars have made claims about the economic consequences of religion, but none grander than those associated with Max Weber's The Protestant Ethic and the Spirit of Capitalism ([1905]1958). Proponents of Weber's thesis argue that:

[t]he Protestant Reformation triggered a mental revolution which made possible the advent of modern capitalism. The worldview propagated by Protestantism broke with traditional psycholagical orientations through its emphasis on personal diligence, frugality, and thrift, on individual responsibility, and through the moral approval it granted to risk-taking and to financial self-improvement (Jacques Delacroix 1992, p. 4)

Despite numerous studies challenging the empirical validity of this argument, the Protestant Ethic thesis lives 'as an article of faith in such varied texts as (nearly all) sociology primers, international business textbooks of all stripes, [and] the middlebrow press' (Delacroix 1995, p. 126; cf, Samuel N. Eisenstadt 1968).

Ironically, the most noteworthy feature of the Protestant Ethic thesis is its absence of empirical support. Economists tempted to carry Weber's myth into their work would do well to heed the rebuttals of Anderson and Robert Tollison (1992), Delacroix (1992), Richard H. Tawney (1926), and especially Kurt Samuelson (1993) who, in the words of the renowned sociologist George Homans, does not 'just tinker with Weber's hypothesis but leaves it in ruins.'

Samuelson and Tawney demonstrate that nearly all the capitalist institutions emphasized by Weber preceded the Protestant Reformation that he viewed as their cause. Samuelson further finds that early Protestant theologians were not particularly interested in economic matters nor did they seem to understand markets. And like their Catholic counterparts, most took a dim view of credit and interest. Finally, Samuelsson refutes Weber's stylized account of European economic history, demonsrating that, across the regions cited by Weber, economic progress was uncorrelated with religion, or was temporally incompatible with Weber's thesis, or actually reversed the pattern claimed by Weber. As Delacroix (1995, p. 126) observes, 'Amsterdam's wealth was centered on Catholic families; the economically advanced German Rhineland is more Catholic than Protestant; all-Catholic Belgium was the second country to industrialize, ahead of a good half-dozen Protestant entities.' Comparing levels of economic development across the Protestant and Catholic countries of Europe, Delacroix (1992) finds no evidence that one group outperforms the other.

Still, there is more to the story of religion's effects than Weber's thesis. At the level of individuals and households, economic behavior and outcomes do correlate with religion. It is, for example, well known that American Jews average significantly higher wages and income than non-jews, a difference largely attributable to their high levels of education (Barry Chiswick 1983, 1985). More striking are the links between religiosity and a wide range of economically important social behavior, such as criminal activity, drug and alcohol consumption, physical and mental health, and marriage, fertility, and divorce.

It is possible, of course, that religion's statistical 'effects' are entirely spurious. One may readily posit the existence of underlying characteristics that shape both religious behaviour and any other behavios. 'Good' kids may avoid drugs, stay in school, and go to church. People with liberal values or deviant lifestyles will probably sort themselves out of conservative denominations. One must agree with Richard Freeman (1986, p. 371) that nothing short of a (probably unattainable) 'genuine experiment' will suffice to demonstrate religion's causal impact. Yet one should also recognize that there exist plausible a priori arguments for religion's impact and that despite numerous attempts to root out spurious correlation, many religious effects remain sebstantively large and statistically significant.

Freeman's (1986, pp. 372-73) own study of churchgoing among black male youth illustrates this last point. Based on a careful analysis of NBER and NLS survey data, he concludes that '[c]hurchgoing [favorably] affects the allocation of time, school attendance, work activity, and the frequency of socially deviant activity [crime, drugs, and alcohol]' and that ' pattern of statistical results suggests that at least some part of the churchgoing effect is the result of an actual causal impact.' Other economists - Lipford, Robert McCormick, and Tollison (1993) and Hull and Frederick Bold (1995) - have obtained analogous results using aggregate data not based on self-reports. Even after controlling for police expenditures and crime-related socioeconomic variables, they observe significantly lower rates of violent crime in states and countries with higher rates of religious membership.

There is, in fact, a large empirical literature on the relationship between religion and different forms of 'deviance,' including crime (T. David Evans et al. 1995), suicide (Bainbridge 1989; Bernice Pescosolido and sharon Georgianna 1989), divorce (Timothy Heaton and Edith Pratt 1990), drug and alcohol use (john Cochran and Ronal Akers 1989), and nonmarital sex (Arland Thornton, William Axinn and Daniel Hill 1992). Studies oof teenage delinquency are particularly abundant, and typically find that youth raised in highly religious homes are less likely to engage in criminal activity, use drugs or alcohol, or engage in premarital sex. These effects are particularly strong for children raised in strict denominations or religiously homogeneous communities. For at least two decades, the criminologists and sociologists producing this research have focussed their efforts on identifying and overcoming spurious correlation. In so doing they have employed sensible theories, sophisticated models, rich and varied data, and numerous controls. The few analogous economic studies, including Freeman (1986), Lipford, McCormick, and Tollison (1993), and Evelyn Lehrer and Carmel Chicwick (1993), have obtained similar results.

Religion seems to affect both mental and physical health. Despite the nonempirical Freudian tradition that blames religion for neurosis, prejudice, and authoritarianism, empirical studies consistently find that high rates of religious commitment and activity are associated with mental health, reduced stress, and increased life satisfaction (Christopher Ellison 1993). Here again, research has focused on problem of spurious correlation, and here again religious effects tend to persist even after controlling for age, income, education, gender, race, marital status, place of residence, social ties, and previous traumatic events (Ellison 1991).

Medical researchers have reported statistically significant religious effects in hundreds of epidemiological studies, many of which have appeared in leading journals such the New England Journal of Medicine, JAMA, Lancet and the American Journal of Epidemiology (Jeffrey Levin and Harold Vanderpool 1987; Levin 1994). The causal mechanisms are sometimes clear-cut: Mormons, Seventh Day Adventists, and members of other strict religious groups enjoy longer lives and lower rates of cancer, stroke, hypertension, and heart disease because they tend to follow their religions' strictures governing smoking, drinking, drug use, and other health-related behavior. Broader correlations between health and religiosity seem to have many causes, including a negative link between church involvement and social support (Levin 1994).

Religious affiliation also affects patters of marriage and marital stability, and it does so in ways consistent with economic models of marriage markets and household production. One may view the religious commitments of husband and wife as complementary, but denomination-specific, human capital inputs to household production (Gary Becker, Elizabeth Landes, and Robert Michael 1977; Iannaccone 1990). This complementarity encourages marriage within one's denomination, particularly if it has few close substitutes, and enhances the stability of same-faith marriages. There is strong support for these predictions, particularly in Lehrer and Chiswick (1993), the most sophisticated study to date. Lehrer and Chiswick find high rates of 'religious endogamy' within all denominations and especially high rates among Jews, Catholics, and Mormons. They also confirm that interfaith marriages are more likely to end in divorce than a marriage to another Mormon. Lehrer (1996a, 1996b) also observes more subtle intermarriage effects, including higher rates of female employment and lower rates of intended fertility, which she interprets as reduced marriage-specific investment due to the increased risk of divorce.

Although the research cited above demonstrates a relationship between religion and economically relevant behaviour, there may be no comparable relationship relationship between religion and economic attitudes."

Laurence R. Iannaccone, Introduction to the economics of religion, Journal of Economic Literature, 36(3):1465–1495, Sep. 1998.