Religious Competition and Reallocation: The Political Economy of Secularization in the Protestant Reformation

Abstract

Using novel microdata, we document an unintended, first-order consequence of the Protestant Reformation: a massive reallocation of resources from religious to secular purposes. To understand this process, we propose a conceptual framework in which the introduction of religious competition shifts political markets where religious authorities provide legitimacy to rulers in exchange for control over resources. Consistent with our framework, religious competition changed the balance of power between secular and religious elites: secular authorities acquired enormous amounts of wealth from monasteries closed during the Reformation, particularly in Protestant regions. This transfer of resources had important consequences. First, it shifted the allocation of upper-tail human capital. Graduates of Protestant universities increasingly took secular, especially administrative, occupations. Protestant university students increasingly studied secular subjects, especially degrees that prepared students for public sector jobs, rather than church sector-specific theology. Second, it affected the sectoral composition of fixed investment. Particularly in Protestant regions, new construction shifted from religious toward secular purposes, especially the building of palaces and administrative buildings, which reflected the increased wealth and power of secular lords. Reallocation was not driven by preexisting economic or cultural differences. Our findings indicate that the Reformation played an important causal role in the secularization of the West.

The Institutional Foundations of Religious Politics: Evidence from Indonesia

“…Researchers have explored links between religion and economic growth, looking at both Christian (Becker and Woessmann, 2009;Cantoni et al, 2018) and Muslim societies (Kuran, 2011;Rubin, 2011).…”

Weber Revisited: The Protestant Ethic and the Spirit of Nationalism

“…We note that this does not rule out that ascetic Protestantism had causal effects centuries before, which indirectly may have affected Catholics and indeed secularization. An alternative interpretation could place Weber's argument in the context of technological change or test for altogether different mechanisms on how the Protestant Reformation might have caused economic development (Cantoni, Dittmar, and Yuchtman 2018). But our findings suggest that differences in religion between Catholics and Protestants (encompassing Lutherans) had little persistence, hence they cannot be considered to be "fundamentals" without further qualification.…”

Religion, Division of Labor, and Conflict: Anti-Semitism in Germany over 600 Years

“…24,25 The sixteenth century brings the Protestant Reformation. Much has been written about the significance of the Protestant Reformation as a watershed moment in European history, in the general social science literature (Weber 1904), and in economics (Ekelund, Hébert, and Tollison 2002;Becker and Woessmann 2009;Cantoni 2012Cantoni , 2015Cantoni, Dittmar, and Yuchtman 2018;Dittmar and Meisenzahl forthcoming;Spenkuch 2017). Work on the exact adoption patterns of the Reformation is comparatively scarce, as shown in a recent survey by Becker, Pfaff, and Rubin (2016).…”

“…As mentioned earlier, Luther's and Calvin's views on usury differed (see Jones 2004), at least in their emphasis or toleration of everyday practice. 29 The recent work by Cantoni, Dittmar, and Yuchtman (2018) highlights the fact that Protestant areas not only turned away from Catholicism but also saw a shift from religious to secular activities. More broadly speaking, the Reformation succeeded because Luther took a practical approach to economic affairs and preferred a rules-based approach to institute the Reformation (see, e.g., Dittmar and Meisenzahl forthcoming on the role of church ordinances in the Reformation).…”