Monday, November 23, 2009

For God's sake: religion and growth

This is a nice piece discussing work by Barro & McCleary on religion and growth


Leigh Caldwell said...

Indeed an interesting article, but I'm not sure I agree with Barro and McCleary's choice of instrumental variables (original paper here).

They claim that the following factors are not influenced by economic growth (though they do admit the word "arguably"):

Two instrumental variables that we use in our study of economic growth are dummy variables for the existence of a state religion and the existence of a regulated market structure, whereby the government approves or appoints church leaders. In some of the analysis, we also use as instruments the composition of a country’s population across the main religions among the population that adheres to some religion. We also use as an instrument a measure of religious diversity constructed from the data on religious adherence.

If we don't accept those as instruments, there's little clarity on the direction of causality. It seems equally plausible that a richer country might adopt different religious beliefs, as that religion influences growth.

Rich people are more likely to believe in lower taxes, but it doesn't follow that believing in low taxes makes you rich.

Kevin Denny said...

Damn, now I am going to have read the paper. Yes, they don't sound terribly convincing.