Oct 31, 2011

Marx vs. Weber: Does Religion affects Politics and the Economy?

The introduction to the theme:
[T]he impact of cultural factors on the economy and politics goes back at least to Karl Marx and Max Weber. Whereas Marx saw culture merely as an expression of the prevailing economic order, Weber allowed for culture to have an independent effect on the economy. For most of the past decades, the economics literature seems to have sided with Marx on this issue by simply ignoring culture as a possible causal factor in economics and politics. Culture was deemed too vague a concept to be useful in economic analysis. Recent years however have seen a resurgence of interest in cultural explanations, Guiso et al. (2006) [it is here, and is becoming a classic] provide an excellent introduction to work on culture in economics.   
We investigate the effect of Reformed Protestantism, relative to Catholicism, on preferences for leisure and for redistribution and intervention in the economy. With a Fuzzy Spatial Regression Discontinuity Design, we exploit a historical quasi- experiment in Western Switzerland, where in the 16th century a so far homogeneous region was split and one part assigned to convert to Protestantism. We find that Reformed Protestantism reduces the fraction of citizens voting for more leisure by 13, and that voting for more redistribution and government intervention by respec- tively 3 and 11 percentage points. These preferences are found to translate into greater income inequality, but we find no robust effect on average income.
The method: 
Early in the 16th century, some cantons adopted the Reformation whereas others did not, which leaves us with both a treatment and control group. 
Focusing on Switzerland has not only methodological but also substantive advantages. Previous work on Weber lumps together the various branches of Protestantism in Western Europe. The Protestant Ethic, however, distinguishes between different branches of Protestantism, and it is Calvinism in which the beliefs supporting a strong work ethic appear in its starkest form. Lutheranism, on the other hand, lacked the mechanisms Weber considered crucial for the spirit of Capitalism to emerge. Thus, studies based on Lutheran regions are not well suited to judge Weber’s claims. Switzerland, in contrast, is the birthplace of Calvinism, which from there expanded into the Netherlands and the Anglo-Saxon world.
Interesting note on Weber's ideas: 
We show that Max Weber’s classic includes hypotheses not only about work ethic and thriftiness, but also about political preferences, with far-ranging implications for the choice of political institutions and therewith also on  economic outcomes like average income and income inequality. In particular, this literature suggests that, relative to Roman Catholicism, Reformed Protestantism has curbed preferences for redistribution and for government intervention in the economy.
Our empirical results suggest that ceteris paribus in a Reformed Protestant electorate support for increasing leisure time will be about 13 percentage points lower than in a Catholic electorate, and that support for government intervention will be about 11 percentage points lower. These results are robust to varying our methodology along all relevant dimensions. Support for redistribution is also lower in Protestant municipalities, but the significance of the results depends on the specification. We do not find an equally robust effect on average income, but we do find the Protestant municipalities to exhibit clearly higher income inequality. 
The paper also has a very good review of the literature [and it uses fireplaces as a proxy for population density!] HT Mostly Economics.

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