Religious identity and the provision of public goods: Evidence from the Indian Princely States

This paper describes a simple model of how a ruler’s religious identity affects public goods provision. Our primary insight is that rulers reduce public goods expenditures to a greater degree when there are privately-provided substitutes excludable by religion.The basic idea is that if the good is provided privately to the ruler’s co-religionists, the ruler faces weaker incentives to provide this public good because his co-religionists receive lower marginal utility from its provision. Testing such a conjecture is an empirical challenge, however, since the religious identity of rulers rarely varies over time and place. We address this problem by exploiting variation in the religion of rulers in the Indian Princely States. Using data from the 1911 and 1931 Indian censuses, we find that Muslim-ruled states had lower Hindu literacy but had no significant impact on Muslim literacy. This result is consistent with our model, as Muslim religious schools provided a substitute for public schools that served both Hindus and Muslims. The model is further substantiated by the fact that the religion of the ruler had no statistically significant impact on railroad ownership or post office provision, neither of which had privately-provided substitutes.     

The effect of religion on Muslims’ charitable contributions to members of a non‐Muslim majority

We investigate the effects of religion on charitable contributions of Muslims who are in a minority to non‐Muslims who are in a majority and to fellow Muslims. We find that religious thinking leads to significantly more charitable giving by 10%. The effect of religious thinking is dependent on the ethnic identity of the recipient. We find a significant effect on giving behavior toward relatively more privileged out‐group members (Han Chinese), but a small and generally insignificant effect toward in‐group members (fellow Muslims). With religious thinking, prosocial behavior toward out‐group members is significantly higher by 14%, which is mainly explained by the religiosity of Muslims. Our results have implications for our understanding of the influence of Islamic rules on Muslims’ attitudes and behavior toward non‐Muslims and for the design of fundraising mechanisms in Muslim communities.     

Institutions,human capital,and growth: The institutional mechanism

This paper contributes to the debate on the relationship between human capital, institutions, and economic growth. The paper first develops a micro-foundation model linking institutions to human capital. The advantage of our modeling strategy is that the human capital accumulation function is derived from an endogenous process. The theoretical model shows that improvements in the quality of institutions foster human capital accumulation, decrease income inequality and change the historical development path. The paper uses cross-country panel data from 1965 to 2005 to test some of the model's propositions and finds that deep structures or structural institutions – which are very persistent and rooted on the historical development path of an economy – affect long-term economic performance, while political institutions are uncorrelated with productivity and long-term economic growth. The empirical estimates also show that growth of physical and human capital – instead of levels – determines long-run economic growth.     

Book production and the onset of modern economic growth

We provide a new data set on per capita book production as a proxy for advanced literacy skills, and assess this relative to other measures. While literacy proxies very basic skills, book production per capita is an indicator for more advanced capabilities. Growth theory suggests that human capital formation plays a significant role in creating the ‘wealth of nations.’ This study tests whether human capital formation has an impact on early-modern growth disparities. In contrast to some previous studies which denied the role of human capital as a crucial determinant of long-term growth, we confirm its importance.      

The impact of foreign direct investment on productivity: New evidence for developing countries

We provide new empirical evidence on the relationship between inward foreign direct investment (FDI) and total factor productivity (TFP) growth using cross-country data for 51 developing countries over the period 1984–2010. Our results suggest a weak direct effect of FDI on TFP growth but, after accounting for the roles of human capital and institutions as contingencies in the FDI-TFP growth relationship, we find a robust FDI-induced productivity growth response dependent on these ‘absorptive capacities’. However, the relevance of the human capital contingency effect diminishes when the effect of institutions is also considered, which suggests that improving institutions is relatively more important than human capital development for developing countries to realise productivity gains from FDI.     

Do Institutions Cause Growth?

We revisit the debate over whether political institutions cause economic growth, or whether, alternatively, growth and human capital accumulation lead to institutional improvement. We find that most indicators of institutional quality used to establish the proposition that institutions cause growth are constructed to be conceptually unsuitable for that purpose. We also find that some of the instrumental variable techniques used in the literature are flawed. Basic OLS results, as well as a variety of additional evidence, suggest that (a) human capital is a more basic source of growth than are the institutions, (b) poor countries get out of poverty through good policies, often pursued by dictators, and (c) subsequently improve their political institutions.     

Political connections, financing and firm performance: Evidence from Chinese private firms

This paper examines the role of affiliation with the ruling Communist Party in the operation of private enterprises in China. Using a nationwide survey of private firms, we find that the Party membership of private entrepreneurs has a positive effect on the performance of their firms when human capital and other relevant variables are controlled. We further find that Party membership helps private entrepreneurs to obtain loans from banks or other state institutions, and affords them more confidence in the legal system. Finally, we find Party membership to be more important to firm performance in regions with weaker market institutions and weaker legal protection.     

The role of human capital and innovation in economic development: evidence from post-Malthusian Prussia

The effect of human capital on growth involves multiple channels. On the one hand, an increase in human capital directly affects economic growth by enhancing labor productivity in production. On the other hand, human capital is an important input into R&D and therefore increases labor productivity indirectly by accelerating technological change. In addition, different types of human capital such as basic and higher education or training-on-the-job might play different roles in both production and innovation activities. We merge individual data on valuable patents granted in Prussia in the late nineteenth-century with county-level data on literacy, craftsmanship, secondary schooling, and income tax revenues to explore the complex relationship between various types of human capital, innovation, and income. We find that the Second Industrial Revolution can be seen as a transition period when it comes to the role of human capital. As in the preceding First Industrial Revolution, “useful knowledge” embodied in master craftsmen was related to innovation, especially of independent inventors. As in the subsequent twentieth century, the quality of basic education was associated with both workers’ productivity and firms’ R&D processes. In a final step, we show that literacy had also a negative effect on fertility which increased with innovation. In general, our findings support the notion that the accumulation of basic human capital was crucial for the transition to modern economic growth.     

The Politics of Capital Flight in the Global Economic Crisis

This paper studies the effects of economic governance and political institutions on portfolio investment during the Global Economic Crisis of 2008–2009. Leveraging a unique cross‐national dataset on portfolio flows immediately following the collapse of Lehman Brothers in September 2008, it shows that countries with “better institutions” – those with more (or less) democratic, more (or less) constrained or more accountable political systems – were no less vulnerable to portfolio outflows than countries with “worse institutions.” However, countries with better governance prior to the crisis – those with better regulatory apparatuses, rule of law, property rights, and those considered less politically risky – experienced lower net portfolio capital outflows after Lehman. Governance is in fact the strongest predictor of portfolio capital flows during the global flight to liquidity, while political institutions perform poorly. The findings shed light onto the political factors that mediated how the collapse of Lehman affected national financial markets the world over, and have implications for literatures on the political economy of foreign investment, as well as for broader topics of institutions, governance, and economic performance.     

The impacts of religion,political ideology,and social capital on religious and secular giving: evidence from the 2006 Social Capital Community Survey

Using a double hurdle model and data from the 2006 Social Capital Community Survey (SCCS2006) we examine religious and secular giving, focusing on the impacts of religion, political ideology and social capital. Our main results indicate that greater participation in religious activities positively impacts religious and secular giving, the intensity of religious belief increases religious giving at the expense of secular giving, religious giving by very conservative individuals is higher than for other ideological groups, and measures of social capital are very important in raising the level and likelihood of philanthropic giving.     

Why the Arab Spring turned Islamic: the political economy of Islam

This paper argues that the fundamental reason for the ascendancy of political Islam in the wake of the Arab revolutions lies in the uncompetitive nature of the religion and its implications for political economy: the fact that Islam is one and long since unchanged, which makes the Islamists’ call very costly to resist and very attractive to follow. The argument is developed through an examination of sectarian and legal history in Islam and a comparison of the nexus between church, state and individual in Christian and Muslim religious traditions. Special attention is devoted to Islamic Law and the law schools that define it.     

Do natural resources help or hinder development? Resource abundance,dependence, and the role of institutions

The resource curse literature presents conflicting evidence on the relationship between natural resources and development. We evaluate the direct effect of resources on developmental outcomes vis-à-vis their indirect effect through the weakening of political institutions using a 3SLS instrumental variable setup that simultaneously estimates development outcomes and institutions. We find that resource abundance and resource dependence affect development outcomes through different channels. While resource abundance generally has a direct positive effect on developmental outcomes, resource dependence has a stronger negative indirect effect that operates through its negative impact on institutional quality. The results also depend on the type of development outcome considered, with more consistent positive direct effects found for physical capital measures and stronger negative indirect effects for human capital development. The use of a simultaneous framework and dual measures of resources reconciles seemingly contradictory findings in earlier work.     

Religious and Economic Preferences: An Empirical Analysis of State Tax Rates and Public Spending

In an attempt to examine the role of religion and religious institutions in the formation of economic and political preferences, we empirically test the relationship between religious and economic variables in the context of the 50 US states. Specifically, we test whether changes in the religious composition of states over time influences state tax rates (public revenue), and state spending patterns (public expenditure). We use church membership rates and religious contributions as alternative measures of a state's religiosity level. The results report a weak relationship between state tax rates and the religiosity of the state population over time. However, a negative relationship was observed between religiosity and public welfare spending, and a positive relationship between religiosity and public education spending. Variations arise when Catholics are included in the analysis of public spending.     

Does religious faith affect household financial market participation? Evidence from China

Based on the 2013 China Household Finance Survey data, this paper investigates the impact of religious faith on household financial market participation and portfolio choice. The results show that religious faith can significantly promote household financial market participation. Besides, religious faith can increase the proportion of risky assets held by households, including equities. We also find that the need for social interaction and human capital accumulation can significantly induce religious residents to participate in financial markets and hold risky assets. Overall, our results reveal how faith affects household finance activities in China.     

The Impact of the London Bombings on the Well-Being of Adolescent Muslims*

We exploit the timing of the London bombings of July 2005, coinciding with a large-scale national survey of adolescents, to identify the impact of extremist Islamic terror attacks on the well-being of adolescent Muslims. Our analysis reveals interesting gender differences. We find evidence of a decline in the happiness of Muslim teenage girls after the bombings, which is also accompanied by a rise in expectations of facing discrimination in the labour market. These findings are robust to several falsification tests. However, we fail to uncover compelling evidence of any impact of the bombings on Muslim teenage boys.     

Literacy and the Migrant–Native Wage Gap

Being able to read and write is one of the most important skills in modern economies. Literacy frequently is a prerequisite for employment and its relevance for productivity and wages is magnified by the fact that it is only through literacy that many other skills become usable. More so than for natives, this argument applies to migrants: even those with high levels of human capital acquired in the country of origin often have it rendered worthless by the absence of literacy in the host‐country language. Using novel data from a large‐scale German adult literacy test (“leo.—Level‐One Studie”, or “LEO”), we investigate the determinants of literacy and show that migrants have systematically lower language skills than natives. We find that any observed raw employment and wage gaps between natives and migrants can be fully explained by these differences.     

The Domestication of Geopolitics: Buddhist-Muslim Conflict and the Policing of Marriage and the Body in Ladakh,India

This paper approaches intimacy as a site of geopolitical practice. What happens when the body is the territory through which geopolitical strategies are played out? In the Leh district of India's Jammu and Kashmir state Buddhist/Muslim conflict is articulated at the site of the body and geopolitical strategies impinge on personal decisions. Over the past century religious identity has increasingly taken on political meaning in Leh, particularly since the 1980s. Interestingly, for average Ladakhis political conflict is described in terms of bodies – that is, through discussions of who should or should not eat together, get married, or have children. By destabilising the global geopolitical scale, we can arrive at a richer and more nuanced understanding of the everyday ways in which our bodies are incorporated into or reject incorporation into geopolitical strategies to control territory.

In the past, the Buddhists were more. Now, it's the Buddhists, mostly, I think, who have used family planning. Among the Shia Muslims, if you look in Kargil and Chushot, even now, they have nine each or eight each. Rinpoches say that our Buddhists are getting fewer, and then our Hill Council, in the future it's going to be run by Shia Muslims. What the Buddhist Association did, it said to all the Buddhists, “You should think. Up to four, or up to six, or up to five, let them be born. Don't sterilize after two.” (Yangdol, 45-year-old Buddhist mother of three) ¹ 1. Names of research participants have been replaced with pseudonyms throughout. Yangdol uses here the term “Balti,” to refer to Shia Muslims. In Ladakh the terms Balti and Kache are frequently used to distinguish between Shia and Sunni Muslims. These terms however, are somewhat misleading as they are geographic markers – Balti means a person from Baltistan and Kache means Kashmiri. These terms are regularly applied to Ladakhis to denote their religious identity, but in my interviews I have found it is more common for Buddhists to deploy these words and that Muslims more often differentiate using the terms Shia and Sunni. In later interviews throughout this paper I have translated Balti and Kache as Shia and Sunni, however, I have bracketed the term to indicate this substitution. A rinpoche is a high monk, generally the reincarnated spiritual leader of a particular monastery. Kargil is the district to Leh's west, dominated by Shia Muslims, and Chushot is a Shia-majority village that meanders along the Indus River, just southeast of Leh.

In the beginning, in the very beginning, the relationship was very good. We were like one person. There were Buddhists who married with Muslims, and Muslims who married with Buddhists. Now, times have changed, and things are different. Now people don't understand, and they have bad hearts. (Razia, 45-year-old Sunni mother of two)     

International flows of people and institutional change

International travel clearly increases human interaction over space and exposes societies to foreign influences, foreign ideas, and foreign institutions. Does international travel promote institutional change in a traveler's home country? This paper uses panel data from 149 countries to test the hypothesis of institutional change stemming from international travel. We generally find that foreign travel does not affect political institutions. In one sub-sample, we find limited evidence that international travel can be a determinant of institutional quality in the home country depending upon whether the home country is an autocracy or democracy.     

INTERNATIONAL TFP DYNAMICS AND HUMAN CAPITAL STOCKS: A PANEL DATA ANALYSIS, 1960–2003

This paper adopts fixed‐effect panel methodologies to obtain TFP values for a sample of 76 countries from 1960 through 2003. Our results are robust to the use of different estimators (LSDV, Kiviet‐corrected LSDV, and GMM). They show that TFP dynamics are characterized by a process of conditional convergence where most countries do not catch up with the U.S., and where human capital plays an important role in technology adoption, as suggested by Nelson and Phelps in 1966. Such a role is robust to the inclusion of controls for the quality of institutions in a country. Further, our results imply a plausible link between stages of development and returns to different levels of education. Finally, we calculate the minimum human capital level necessary to generate catch‐up and find that virtually all countries are above that level—a result that again emphasizes the importance of human capital in technology diffusion.     

Accounting for Sustainable Development over the Long‐Run: Lessons from Germany

We construct long‐run sustainability indicators based on changes in Comprehensive Wealth – which we refer to as Genuine Savings (GS) – for Germany over the period 1850–2000. We find that German sustainability indicators are positive for the most part, although they are negative during and after the two World Wars and also the Great Depression. We also test the relationship between these wealth changes and a number of measures of well‐being over the long‐run: changes in consumption as well as changes in average height and infant mortality rates. We find a positive relationship between GS and our well‐being indicators over different time horizons, however, the relationship breaks down during WWII. We also test if the GS/Comprehensive Wealth framework is able to cope with massive disinvestment at the end of the Second World War due to war‐related destructions and dismantlement. We find that negative rates of GS were by and large avoided due to the accumulation of technology and growth‐friendly institutions. We demonstrate the importance of broader measures of capital, including measures of technological progress, and its role in the process of economic development; and the limits of conventional measures of investment to understand why future German consumption did not collapse.