Working Paper: NBER ID: w21506
Authors: Stelios Michalopoulos; Alireza Naghavi; Giovanni Prarolo
Abstract: This study explores the interaction between trade and geography in shaping the Islamic economic doctrine. We build a model where an unequal distribution of land quality in presence of trade opportunities conferred differential gains from trade across regions, fostering predatory behavior by groups residing in the poorly endowed territories. We show that in such an environment it was mutually beneficial to institute an economic system of income redistribution featuring income transfers in return for safe passage to conduct trade. A commitment problem, however, rendered a merely static redistribution scheme unsustainable. Islam developed a set of dynamic redistributive rules that were self-enforcing, in regions where arid lands dominated the landscape. While such principles fostered the expansion of trade within the Muslim world they limited the accumulation of wealth by the commercial elite, shaping the economic trajectory of Islamic lands in the pre-industrial era.
Keywords: Islam; Inequality; Trade; Economic Development
JEL Codes: F10; O1; Z12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| unequal distribution of land quality (D30) | predatory behavior by groups in less privileged territories (P37) |
| predatory behavior by groups in less privileged territories (P37) | need for income redistribution mechanisms (E25) |
| need for income redistribution mechanisms (E25) | static income redistribution schemes, such as zakat (P43) |
| static income redistribution schemes (H23) | development of dynamic redistributive rules (D72) |
| dynamic redistributive rules (D72) | limit wealth accumulation (P19) |
| dynamic redistributive rules (D72) | promote public investments (H54) |