Impact of Religion on Regional Economic Development: Evidence From 19th Century Prussia

Abstract

Economic development can be influenced by various policies such as improving infrastructure, changing the legal system, or increasing educational attainment. However, to the extent that culture influences economic outcomes, that is very difficult for policy to alter. To examine culture’s role, we assess religion’s influence on historical regional economic development using 19th-century Prussian data. We find that compared to predominantly Catholic Prussian regions, Protestantism facilitated 19th-century industrialization and agricultural productivity growth. On the other hand, there was not a positive and significant impact of Protestantism on early 19th-century regional population growth, though there is a negative and significant effect in the latter 19th century. This result is robust to using IV regression. Protestantism’s positive impacts on the growth of industrialization and agricultural growth is not explained by differing education levels or by differing birthrates across regions, ruling out other indirect effects of Protestantism, suggesting other cultural roles of religion.