Reallocation and secularization: the economic consequences of the protestant reformation

Davide Cantoni, Jeremiah Dittmar and Noam Yuchtman

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: The Protestant Reformation, beginning in 1517, was both a shock to the market for religion and a first-order economic shock. We study its impact on the allocation of resources between the religious and secular sectors in Germany, collecting data on the allocation of human and physical capital. While Protestant reformers aimed to elevate the role of religion, we find that the Reformation produced rapid economic secularization. The interaction between religious competition and political economy explains the shift in investments in human and fixed capital away from the religious sector. Large numbers of monasteries were expropriated during the Reformation, particularly in Protestant regions. This transfer of resources shifted the demand for labor between religious and secular sectors: graduates from Protestant universities increasingly entered secular occupations. Consistent with forward-looking behavior, students at Protestant universities shifted from the study of theology toward secular degrees. The appropriation of resources by secular rulers is also reflected in construction: during the Reformation, religious construction declined, particularly in Protestant regions, while secular construction increased, especially for administrative purposes. Reallocation was not driven by pre-existing economic or cultural differences.

Keywords: protestant reformation; secularization; sectoral allocation; human capital (search for similar items in EconPapers)
JEL-codes: E02 J24 N13 N33 (search for similar items in EconPapers)
Date: 2017-05-17
New Economics Papers: this item is included in nep-his and nep-lma
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Citations: View citations in EconPapers (1)

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Working Paper: Reallocation and secularization: the economic consequences of the Protestant Reformation (2017)
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