Macroeconomic Studies

To my knowledge, GLAHE and VORHIES (1989) provide one of the first econometric studies that investigate the impact of religion at macro level. They assess the correlation of religious beliefs, economic liberty, and development. The measure of development includes the per capita gross domestic product (GDP) as well as indicators of education and health. The data set includes 150 countries. In Jewish and Christian countries, they find that political liberty is positively correlated with development. This is not the case in Muslim and other countries, for which they do not find a significant relationship.

Calculating an index of “Judeo-Christian Democracy” by using the population share that is Jewish or Christian and an index score of political liberties, GLAHE and VORHIES

show a positive relationship between religion and liberty on the one hand and development on the other. They conclude that “Judeo-Christian” countries are more likely to be democracies and if they are capitalist they are more likely to have higher levels of economic development.

In the approach by HEATH, WATERS, and WATSON (1995), it is not countries that constitute the units of observation, but federal states of the United States of America.

They regress average per capita income inter alia on the percentage of the states' population that is Jewish, Catholic, liberal Protestant and fundamentalist Protestant.

The strongest effect on per capita income is exerted by fundamentalist Protestantism

and is negative. The authors attribute this to the inimical attitude of fundamentalists toward liberal values. Furthermore, Judaism has a positive effect, while the effect of Catholicism is negative, though not to an extent similar to that of fundamentalist Protestantism.

GRIER (1997) evaluates the effect of different religions in 63 former colonies. A dummy variable for the growth rate of Protestantism is included in a neoclassical growth equation and the level of Protestantism is included as a regressor in a per capita income equation. The results are that Protestantism can explain part of, but not all of the difference in economic performance between former Spanish and French (i.e., Catholic) colonies on the one hand and former British (i.e., Protestant) colonies on the other hand.

BLUM and DUDLEY (2001) investigate the development of 316 European cities from 1500 to 1750 using a theoretic approach based on game theory as well as the theory of networks. Their argument is that Protestants are more likely to be reliable trade partners and hence better economic networks emerged in Protestant northern Europe. Population growth of the cities is used as a proxy for economic growth and among the explanatory variables are dummies for Protestantism as well as “network effects” variables. The empirical results show that the effect of Protestantism in itself is only positive and significant in some of the model specifications. The network variables, on the contrary, always have significant explanatory power for Protestant cities. For Catholic cities there is no such effect. The authors conclude that Protestantism does not have a direct intrinsic effect in the sense that Protestants are more successful because they are thriftier, more hard-working, and more frugal. According to BLUM and DUDLEY (2001), the effect rather transmitted through information networks that developed because Protestants had a higher propensity to honor their contracts even with unknown people and thus lead to economic success of the Protestant cities.

Catholic and Protestant cities are also used as data in the study by CANTONI (2010). In this study the growth of 272 cities in the German lands from 1300 to 1900 is investigated. Differing from BLUM and DUDLEY (2001), CANTONI's results do not support the hypothesis that Protestant cities are economically more successful.

The most influential study of recent years is the research done by BARRO and MCCLEARY (2003). Their approach is based on the predications of the WEBER thesis and a theoretical framework that views religious attendance as an input of the religious

sector and beliefs as its output. The sector is taken to be more productive the larger the relation of beliefs to attendance is. Aggregated survey data on religiosity and the medium-term growth rates of up to 41 countries are used. Data from three survey waves is used, yielding a total of 118 observations. The variables describing religiosity are monthly church attendance, belief in heaven, and belief in hell. They are included as explanatory variables when empirically analyzing differences in growth rates. The results of BARRO and MCCLEARY's regressions show that beliefs, particularly belief in hell, positively affect growth, while monthly church attendance has a negative effect.

Relying on an instrumental variable approach, the relationship is given a causal interpretation. The authors conclude that “stronger religious beliefs stimulate growth because they help sustain specific individual behaviours that enhance productivity”

(ibid., 779). In a subsequent study, MCCLEARY and BARRO (2006) obtain the same results with an increased number of observations (53 countries, yielding 153 observations).

MANGELOJA (2005) uses a similar theoretical framework as BARRO and MCCLEARY

(2003) and MCCLEARY and BARRO (2006), but a different methodology. He investigates the influence of belief in hell (taken as an indicator of religious belief), religious attendance, and religious sector productivity (as defined by BARRO and MCCLEARY) on economic growth. Data from 8 countries and the time span from 1971 to 2001 is used, yielding 31 observations for each country.⁴ Data from all countries is analyzed as panel data; data from single countries is analyzed as time-series data. In the panel data regression, only belief in hell has a significant positive effect. In the time-series regressions, religious productivity is only significant and positive in the case of Finland.

Furthermore, the following effects are significant: Belief in hell has a positive effect for Finland and Spain (in line with BARRO and MCCLEARY's findings), but a negative one for Sweden. As in BARRO and MCCLEARY (2003) church attendance has a negative effect, albeit in MANGELOJA's study only for Finland and Spain. There is, however, a positive effect for Japan.

SALA-I-MARTIN, DOPPELHOFER, and MILLER's (2004) conduct a meta analysis of studies investigating economic growth. Among the 18 out of 67 significant variables feature three religious ones: the fraction of the population that is Confucian, the fraction that is Muslim, and the Buddhist fraction. Protestantism does not have a significant effect.

4 However, as DE JONG (2011, 122) points out, the respective survey data is only available for four waves during that time frame, thus impossibly yielding 31 independent observations.

These results are surprising, since commonly Protestantism is thought to have a positive effect. On the other hand, the study is quite illustrative for the recent tendency to include religion in empirical studies on economic growth. The positive effect of a number of different religions relates well to the idea that what is important is the degree of religiosity and not a particular doctrine.

Focusing particularly on the alleged negative effect of Islam, NOLAND (2005) performs a cross-country analysis of up to 78 countries as well as a within-country analyzes of India, Malaysia, and Ghana. Mid-term and long-term GDP growth and growth in total factor productivity (TFP) are used as dependent variables; the religious variables are the population shares adhering to a specific religion. In the regression of mid-term TFP growth, none of the religions have a significant effect. In the regression of mid-term GDP growth, however, the Jewish, Catholic, and Protestant population shares have a significant effect that is negative. In the long-term regression, on the other hand, those three have a significant positive effect. The mid-term country results show a significant positive effect of Buddhist, Jain, and other religion shares on GDP growth, but none on TFP. For Malaysia, NOLAND finds no significant effect when accounting for ethnic differences. In the Ghanaian regression only the Muslim share has a significant positive effect. The effect for Christian shares is insignificant, regardless of the inclusion of only the Christian share or the different denominations. Hence, the picture drawn by NOLAND's various regressions is heterogeneous. The main point NOLAND highlights is that Islam never has a negative effect.

ORTIZ (2009) studies the influence of religion on GDP growth and changes in TFP for seven Latin American countries. He uses combined time-series and cross-sectional data survey data on religiosity. In this method, data from 50 years are used as 50 different observations, thus the focus is more on time-series data. This is similar to HEATH, WATERS, and WATSON (1995), GRIER (1997), MANGELOJA (2005), BARRO and MCCLEARY (2003) and MCCLEARY and BARRO (2006), who combine cross-sectional with time-series data as well. Except for MANGELOJA (2005), however, their focus lies more on the cross-sectional data since they use far less time-series observations than cross-sectional observations. In ORTIZ's (2009) study, the Catholic, Protestant, Jewish, and Muslim share of the population are included in a standard economic growth equation, inter alia education, civil liberties indices, and trade openness. Interestingly, the share of Catholics has a significant positive effect in almost all countries, both in the

regression of growth as well as in the regression of TFP. One exception is Uruguay. The effect of Catholicism is contrary to most other studies. Judaism and Islam have a significant positive influence on growth and TFP in Argentina and Brazil, respectively, while in Chile and Costa Rica Protestantism has a significant positive effect on TFP.