The Economic Effects of the Protestant Reformation: Testing the Weber Hypothesis...

Many theories, most famously Max Weber’s essay on the “Protestant ethic,” have hypothesized that Protestantism should have favored economic development. With their considerable religious heterogeneity and stability of denominational affiliations until the 19th century, the German Lands of the Holy Roman Empire present an ideal testing ground for this hypothesis. Using population figures in a dataset comprising 272 cities in the years 1300–1900, I find no effects of Protestantism on economic growth. The finding is robust to the inclusion of a variety of controls, and does not appear to depend on data selection or small sample size. In addition, Protestantism has no effect when interacted with other likely determinants of economic development. I also analyze the endogeneity of religious choice; instrumental variables estimates of the effects of Protestantism are similar to the OLS results.

Max Weber, in his seminal work, proposed what might be the most famous theory about the impact of cultural factors, namely beliefs about religion and afterlife, on economic growth. Despite its renown, this theory has rarely been tested empirically in a systematic fashion. The evidence presented in this paper points consistently towards the absence of any differences in the long-run performance of Protestant and Catholic regions. In light of the various theories that suggest that Protestants should be more inclined to economic activity, this result is surprising. Three broad categories of facts can explain the absence of results.

The first relates to ideological aspects. Many theories of Protestant advantage, most notably Max Weber’s, are in fact based on an analysis of the doctrines of Calvinists or of minor Protestant sects, such as the Puritans, and not on the teachings of Lutheranism, the largest denomination in Germany. While I have found no substantial differences between Calvinist and either Catholic or Lutheran territories of the Holy Roman Empire, I cannot exclude that other, minor religious groups had an ideology that was conducive to economic growth. Testing this latter hypothesis, however, would be difficult, as it is much more difficult to find exogenous sources of variation of sect membership, and because it is hard to disentangle the impact of religious beliefs from the status of belonging to a minority.36

The second set of reasons can be classified as “institutional.” If we consider the institutional structure as the main determinant of the economic performance of a territory (Acemoglu, Johnson and Robinson 2005a), there are reasons to think that the latter was generally not so different in Catholic and Protestant states. Measured by modern standards of democracy and security of property rights, all German states did not fare well until the 19th century.

The more interesting historical process in the period considered, however, is the creation of the modern territorial state, through the abolition of local privileges and the creation of a centralized bureaucratic state apparatus (Tilly 1990). In this respect, both Protestant and Catholic states in Germany seem to have profited from the Reformation, resulting in a zero net effect of Protestantism. Protestants clearly were advantaged by the ability to unite the secular and spiritual powers in one hand, as emphasized in the analysis of Ernst Troeltsch (see p. 5 in this paper). But through the parallel development of the Counter-Reformation, the Catholic church gave its temporal rulers similar powers to enforce both religious doctrine and social discipline.37

Finally, a reason why Protestant areas do not seem to fare any better than their Catholic counterparts in the present dataset might be related with the urban setting analyzed. Cities, with their varied population of artisans, traders, scholars and merchants, might have been just as cosmopolitan and open to new business practices in either a Catholic or a Protestant setting. In addition, if literacy is the key ingredient for economic growth, as suggested by Becker andW¨oßmann’s (2009) interpretation, the little evidence available for the pre-industrial period before 1800 suggests that in an urban setting literacy rates were relatively high by international standards even in Catholic cities (Franc¸ois 1977).38

While there are many reasons to expect Protestant cities and states to have been more economically dynamic during the past centuries—because of their work ethic, their attitude toward business, their encouragement of literacy—the present paper finds that there is no effect of religious denominations on a likely indicator of economic development, city size. Despite their differing views on religious matters, Protestants and Catholics might not have been so different in their economic behavior after all.

There are plenty of Catholic areas that were highly developed economically in the late 1800’s when the Weber theory was being formulated. Belgium, Silesia, Bohemia, Bavaria, Saarland, Rhineland, Argentina, etc. And there were just as many hopelessly backwards Protestant areas essentially mired in a feudal economy - Scandanavia, the American South, Prussia, Pomerania, Mecklenburg, Latvia, Finland.

Economic growth in the 1800’s is much more highly correlated with the presence of mineral wealth to be exploited. England, Pennsylvania, Ohio, Michigan, Minnesota, Wisconsin, Illinois, Indiana, Luxemburg, Silesia, Lorraine, Bohemia, etc. all had great mineral wealth, leading to factories and industrialization. No accident that the most economically advanced city in the American South int he late 1800’s and early 1900’s was Birmingham, surrounded by iron and coal deposits.

There were a lot of backwoods Protestant areas, just as there were many Catholic boom towns.

The Industrial Revolution spread with little regard to religion.

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