Poorer but Happier: The Economic Consequences of Religious Devotion

 

Economic Growth

Poorer but Happier: The Economic Consequences of Religious Devotion

Filipe CampanteDavid Yanagizawa-Drott Faculty ResearchersFilipe Campante, Associate Professor of Public Policy; David Yanagizawa-Drott, Assistant Professor of Public Policy; Harvard Kennedy SchoolPaper Title
Does Religion Affect Economic Growth and Happiness? Evidence from Ramadan

Religion is common to societies around the globe—and throughout history, as well. The pervasiveness of this phenomenon has prompted researchers for a century or more to see whether participation in religion has repercussions for the economy and other aspects of life. “Although previous analyses have found correlations between religious involvement and economic growth, it has been hard to pin down a causal effect, due to the limitations of the data,” says Filipe Campante, Associate Professor of Public Policy at Harvard Kennedy School.

In their new paper, Campante and his colleague David Yanagizawa-Drott, Assistant Professor of Public Policy, were able to go further than their predecessors, and establish the first “credible causal link,” by taking advantage of a particular feature of Ramadan, the Islamic holy month. During this time, the Muslim faithful are expected to fast between dawn and sunset. That rule provided a rare opportunity for Campante and Yanagizawa-Drott, because the length of the fast—and hence the intensity of religious practice—varies according to latitude and also from year to year, owing to the vagaries of the lunar calendar. When Ramadan occurs during the Northern Hemisphere winter, for example, fasting in Bangladesh will be longer than it is in Turkey, because Bangladesh lies closer to the equator. When Ramadan occurs during the summer, fasting in Turkey will be longer than it is in Bangladesh.

“The crucial point is that we were able to find a source of variation in the religious rule—how long you are supposed to fast—that is unrelated to the economic environment,” says Campante. He and Yanagizawa-Drott could then exploit this “idiosyncratic variation” to tie religious observance to specific economic outcomes.

One might similarly try to draw a connection between changes in church attendance and economic growth. “But we couldn’t be sure these changes weren’t driven by something else tied to economic growth,” Campante says. “Maybe people go to church more when the economy is going through rough times.” In Ramadan, the length of the fast simply depends on the length of the day—which is dictated by one’s location on the planet—and is not affected by the economy.

On the other hand, the researchers surmised, the length of the fast may well affect the economy. Their investigation revealed, in fact, “that longer prescribed Ramadan fasting has a robust negative effect on output growth in Muslim countries, whether measured by GDP per capita or GDP.” If daily fasting increases from 12 to 13 hours, for instance, output growth drops roughly 0.75 percent.

The decline in economic growth during years of longer fasting cannot be attributed to the physiological effects of the fasting itself. “When it comes to output, employment, or wages, the effects in yearly data seem too large to be ascribed to a one-month slowdown,” the authors contend. Instead, they attribute the economic drop-off to a choice to work fewer hours so that people can devote more time to religion. This conclusion is backed by labor statistics, which show more workers leaving jobs in the manufacturing sector during Ramadan to become self-employed, as vendors and the like—working when and as long as they please. Manufacturing wages increase during these times, reinforcing the notion that the shifts in employment are voluntary and not the result of companies’ cutting jobs.

The authors’ study had another important dimension: Relying on data from the World Values Survey, they found that when the hours of obligatory fasting increase, Muslim individuals report greater levels of satisfaction, despite their diminished prosperity and that of their country as a whole. In other words, the Harvard scholars observe, “longer Ramadan fasting makes people poorer but happier.” One conclusion is that GDP should not be the sole measure of a nation’s well-being.

Campante and Yanagizawa-Drott also suggest that the Ramadan effect—associating lower growth with greater personal contentment—may exemplify a more wide-ranging phenomenon connected to other religious practices and perhaps even “secular mechanisms” such as mandatory vacations. But that, they say, “is an empirical question that only future research can answer.”

- by Steve Nadis


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