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

Davide Cantoni, Jeremiah Dittmar and Noam Yuchtman

No 23934, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E02 J24 N13 N33 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-his, nep-lma and nep-mac
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Published as 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.

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Journal Article: Religious Competition and Reallocation: the Political Economy of Secularization in the Protestant Reformation* (2018)
Working Paper: Religious competition and reallocation: the political economy of secularization in the Protestant Reformation (2018)
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