Trade and Geography in the Economic Origins of Islam: Theory and Evidence

Abstract

This research examines the economic origins of Islam and uncovers two empirical regularities. First, Muslim countries, virtual countries and ethnic groups, exhibit highly unequal regional agricultural endowments. Second, Muslim adherence is systematically larger along the pre-Islamic trade routes in the Old World. The theory argues that this particular type of geography (i) determined the economic aspects of the religious doctrine upon which Islam was formed, and (ii) shaped its subsequent economic performance. It suggests that the unequal distribution of land endowments conferred di¤erential gains from trade across regions, fostering predatory behavior from the poorly endowed ones. In such an environment it was mutually bene…cial to institute a system of income redistribution. However, a higher propensity to save by the rich would exacerbate wealth inequality rendering redistribution unsustainable, leading to the demise of the Islamic unity. Consequently, income inequality had to remain within limits for Islam to persist. This was instituted via restrictions on physical capital accumulation. Such rules rendered the investments on public goods, through religious endowments, increasingly attractive. As a result, capital accumulation remained low and wealth inequality bounded. Geography and trade shaped the set of economically relevant religious principles of Islam a¤ecting its economic trajectory in the preindustrial world.

How does religion bias the allocation of Foreign Direct Investment? The role of institutions

“…Several case studies like Ensminger (1997), Richman (2002) or Greif (2006) shed light on religion's role for breeding trust and promoting economic exchanges between trading partners. This qualitative material begins to be supplemented by some quantitative analysis (Michalopoulos et al, 2010). Empirically, however, it is difficult to claim that any statistical association between religion and the volume of economic exchanges is mediated by an increase in trust, for it is subject to the difficulty of gathering reliable data on bilateral trust levels.…”

Ecology, Trade, and States in Pre-Colonial Africa

“…See Michalopoulos, Naghavi, and Prarolo (). This map includes mostly routes across the Sahara or connecting Lake Victoria to the coast.…”

Does Land Abundance Explain African Institutions?

“…Though the existing literature has focused largely on the effect of geography on institutions created by Europeans, there are exceptions. Michalopoulos et al (2010) and Michalopoulos (2012) link heterogeneity in land quality to both ethnic fragmentation and the spread of Islam. I continue this line of research by testing what geographical features of societies predict land rights, slavery and population density.…”