Religious Competition and Reallocation: The Political Economy of Secularization in the Protestant Reformation
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.
Helpful and much appreciated suggestions, critiques and encouragement were provided by Ernesto Dal Bo, Matt Notowidigdo, Yona Rubinstein, Jan Luiten van Zanden, Hans-Joachim Voth, and seminar participants at Bonn, Harvard, LSE, NYU Stern, UC Davis, Utrecht, the AEA meetings, the DAE meeting at the NBER Summer Institute, the RES meeting, the University of California GEM-BPP Research Workshop, the University of Munich Conference on the Long Shadow of History, and the World Economic History Congress. Excellent research assistance was provided by Julia Bewerunge, Tillmann von Carnap, Florian Dobler, Nikolaus Drax, Russell Gasdia, Max Hofl, Selina Hofstetter, Carolin Maier, Matthias Mall, Daniela Miehling, and Skipper Seabold. Cantoni acknowledges research support from the Marie Curie Career Integration Grant. Dittmar acknowledges research support from the European Research Council. The authors have no conflict of interest, financial or otherwise, related to this study. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Davide Cantoni & Jeremiah Dittmar & Noam Yuchtman, 2018. "Religious Competition and Reallocation: the Political Economy of Secularization in the Protestant Reformation*," The Quarterly Journal of Economics, vol 133(4), pages 2037-2096. citation courtesy of