Working Paper: NBER ID: w23934
Authors: Davide Cantoni; Jeremiah Dittmar; Noam Yuchtman
Abstract: Using novel microdata, we document an unintended, first-order consequence of the Protestant Reformation: a massive reallocation of resources from religious to secular purposes. To understand this process, we propose a conceptual framework in which the introduction of religious competition shifts political markets where religious authorities provide legitimacy to rulers in exchange for control over resources. Consistent with our framework, religious competition changed the balance of power between secular and religious elites: secular authorities acquired enormous amounts of wealth from monasteries closed during the Reformation, particularly in Protestant regions. This transfer of resources had important consequences. First, it shifted the allocation of upper-tail human capital. Graduates of Protestant universities increasingly took secular, especially administrative, occupations. Protestant university students increasingly studied secular subjects, especially degrees that prepared students for public sector jobs, rather than church sector-specific theology. Second, it affected the sectoral composition of fixed investment. Particularly in Protestant regions, new construction shifted from religious toward secular purposes, especially the building of palaces and administrative buildings, which reflected the increased wealth and power of secular lords. Reallocation was not driven by preexisting economic or cultural differences. Our findings indicate that the Reformation played an important causal role in the secularization of the West.
Keywords: Protestant Reformation; secularization; religious competition; resource allocation; political economy
JEL Codes: E02; J24; N13; N33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Protestant Reformation (N33) | reallocation of resources (D61) |
| closure of monasteries (Z12) | transfer of wealth to secular authorities (H13) |
| transfer of wealth to secular authorities (H13) | decline in clerical employment (J63) |
| transfer of wealth to secular authorities (H13) | increase in secular administrative positions (I29) |
| Protestant Reformation (N33) | shift in university graduates' occupational choices (J62) |
| shift in university graduates' occupational choices (J62) | increase in secular job placements (J68) |
| Protestant Reformation (N33) | new construction activities shifted to secular purposes (L74) |
| new construction activities shifted to secular purposes (L74) | significant investments in administrative buildings and palaces (H54) |