Spirit of Capitalism: Religion and Economic Development

By Barro, Robert J. | Harvard International Review, Winter 2004 | Go to article overview

Spirit of Capitalism: Religion and Economic Development


Barro, Robert J., Harvard International Review


Research across a broad group of countries has identified many determinants of economic growth, leading to the conclusion that successful explanations of economic performance have to go beyond economic variables to encompass political and social forces. Economic growth has been found to depend on variables such as education, health, fertility rates, rule of law, and electoral rights. Also important factors are propensity to invest, size of government, international openness, and macroeconomic stability. Given favorable levels of these key determinants of growth, poorer countries tend to grow faster and, thereby, approach the gross domestic product (GDP) of richer countries. However, because poorer countries typically rank low on a number of these growth determinants, they tend not to grow faster than average in an overall sense.

In the continuing search for an adequate theory of economic growth, some researchers have increasingly argued that such explanations for growth should go further to include a nation's culture, especially religion. In fact, recent research indicates that the economic influence of religion has a profound impact on economic performance. Religion influences the formation of beliefs that shape individual traits such as honesty, work ethic, thrift, and openness to strangers. Religious beliefs and related character traits can be seen as "spiritual capital," a concept that is analogous to the human capital that economists have found to be important for worker productivity. Human capital includes the skills and knowledge that come from formal schooling, on-the-job training, and guidance from parents. Analogously, spiritual capital includes formal education through organized religion, as well as influences from family and social interactions. Thus, the economic effects of organized religion can be seen as operating through the formation of spiritual capital.

Measuring Religion's Impact

The relationship between religion and economic growth becomes clear when measures of religiosity are incorporated into more traditional cross-country data sets on national-accounts variables and other economic, political, and social indicators observed since 1960. The measures of participation in organized religion and of religious beliefs come from representative surveys of individuals in about 60 countries, such as the World Values Surveys, International Social Survey Program, and Gallup Millennium Survey. Each survey typically covers between 1,000 and 2,000 respondents in a survey-year, providing data on household attendance rates at houses of worship, as well as information on religious beliefs quantified as the fraction of the population who answered "yes" to the question of whether they believe in heaven, hell, life after death, and God. Other questions, which might be more robust across religions, are whether the respondent considers himself or herself to be religious and whether religion plays an important role in his or her life.

But these data sources alone are not enough basis for firm conclusions about the role of religion in economic growth, since identifying the precise direction of causation is problematic. While the goal is to understand the effects of religiosity on economic growth, as measured by national levels of worship attendance and religious beliefs, there may be reverse effects of economic development on religiosity. This reverse channel has, in fact, been the focus of a substantial literature in the sociology of religion.

One prominent theory in this literature is the secularization hypothesis, whereby economic development is thought to make people less religions as gauged, for example, by church attendance and religious beliefs. This hypothesis also proposes that economic progress causes organized religion to play a lesser role in political decision-making and in other general social and legal processes.

The secularization hypothesis is controversial, and the continuing vitality, of religion in the United States has often been offered as a counter-example.

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