Islam, inequality and pre-industrial comparative development

Abstract

This study explores the interaction between trade and geography in shaping the Islamic economic doctrine and in turn the comparative development of the Muslim world. We build a model where an unequal distribution of land quality in presence of trade opportunities conferred di¤erential gains from trade across regions, fostering predatory behavior from the poorly endowed ones. We show that in such an environment it was mutually bene…cial to institute an economic system of income redistribution featuring direct income transfers in return for safe passage to conduct trade. A commitment problem, however, rendered a merely static redistribution system unsustainable. Islam added a set of dynamic redistributive rules that were self-enforcing under large gains from trade and high proportions of arid land. While such principles fostered the expansion of trade within the Muslim world they limited the accumulation of wealth by the commercial elite, shaping the economic trajectory of Islamic lands in the preindustrial era.

Trade and Geography in the Spread of Islam

“…Second, in our companion paper, Michalopoulos et al (2016), we advance theoretically a related hypothesis where the Islamic economic rules arise to mitigate social tensions across Arabia's tribes exposed to long-distance trade opportunities during the 7th century CE. In a nutshell, we argue that trade diversion over Arabia created new potential economic benefits for the scattered oases by transforming them 2018] to trade hubs providing services to the trading community (Watt, 1961).…”

“…Insights from the rapidly growing theoretical and empirical literature on the persistence of beliefs and attitudes may shed light on this phenomenon (Bisin and Verdier, 2000;Voigtlander and Voth, 2012). Finally, having identified some of the forces behind the formation and spread of Islam, one might examine the economic and political consequences for the short-run and the long-run development of the Muslim world (Michalopoulos et al, 2016). We plan to address some of these issues in subsequent research.…”

“…Along the same lines, contemporary scholars have noted that when farmers and herders coexisted in absence of an institutional framework coordinating their activities, their interactions were often conflictual, disrupting trade flows across these territories (Richerson, 1996). We conjecture that Islam with its redistributive economic principles was a unifying force aimed at reining in the underlying inequality in exchange for security for the trading caravans (Michalopoulos et al, 2016). The premise that geographic inequality becomes more salient when long-distance trade opportunities arise generates an auxiliary prediction.…”

The Other Side of Zakat in Poverty Reduction: A Phenomenology Study

“…Thus, zakat will be able to increase production by meeting the high demand for goods. In order to optimize the influence of zakat, two approaches should be used, namely a partial approach and a structural approach (Mercier et al, 2020;Michalopoulos et al, 2016;Muhammad & Saad, 2016;Nusrate Aziz & Mohamad, 2016;Osman et al, 2015).…”

Religion and Innovation in Europe: Implications for Product Life-Cycle Management

“…It was a market approach to obtain the results that historically were reached through public goods provision from religious institutions. As Michalopoulos et al (2016) said, Islam restrained inequality in order to survive. Inequality has been one of the consequences of the globalization process that we have been living in the past decades.…”