1 Religious Freedom, Interference in Religion, and Economic Growth: An Empirical Examination across Countries Ilan Alon, Shaomin Li, and Jun Wu* *Authors’ names are listed alphabetically Ilan Alon is Cornell Professor of International Business at Rollins College. He is Editor-in-Chief of the International Journal of Emerging Markets. His publications have appeared in Harvard Business Review, Management International Review and Journal of International Marketing, among others. Shaomin Li is Eminent Scholar and Professor at Old Dominion University. He has published in Harvard Business Review and World Development, and is the author of Managing International Business in Relation-based versus Rule-based Countries as well as thirteen other books. Jun Wu is Assistant Professor at Savannah State University. Her publications have appeared in Management International Review and International Business Review, among others, and she serves as Associate Editor of the journal series International Marketing and Management Research.
30
Embed
Religious Freedom, Interference in Religion, and … Freedom, Interference in Religion, and Economic Growth: An Empirical Examination across Countries ... at its core religiosity preaches
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
1
Religious Freedom, Interference in Religion, and Economic Growth:
An Empirical Examination across Countries
Ilan Alon, Shaomin Li, and Jun Wu*
*Authors’ names are listed alphabetically
Ilan Alon is Cornell Professor of International Business at Rollins College. He is Editor-in-Chief
of the International Journal of Emerging Markets. His publications have appeared in Harvard
Business Review, Management International Review and Journal of International Marketing,
among others.
Shaomin Li is Eminent Scholar and Professor at Old Dominion University. He has published in
Harvard Business Review and World Development, and is the author of Managing International
Business in Relation-based versus Rule-based Countries as well as thirteen other books.
Jun Wu is Assistant Professor at Savannah State University. Her publications have appeared in
Management International Review and International Business Review, among others, and she
serves as Associate Editor of the journal series International Marketing and Management
Research.
2
Abstract
Freedom is generally regarded as good for economic growth. Studies have shown that economic,
political and religious freedoms generally promote economic development. Using an
institutional approach, we show that interference in religion (or lack of religious freedom) can be
broken into social hostilities (soft institutions) and governmental restrictions (hard institutions),
and that the impacts of both are varied on economic growth. Testing the role of religion and
religious freedom (or lack thereof) over a large cross-section of countries, we find that greater
religious diversity, lower social hostilities towards religion, but some government limitations,
may optimally promote economic development.
3
The continued and from time to time escalating violence and conflicts that are religion-related
pose immediate questions to scholars of political economy regarding the role of religion,
religious freedom and social development, democratization, and, especially, economic
development. It is fair to say that any phrase that includes the word “freedom” tends to convey a
positive meaning, such as political freedom or economic freedom. Similarly, the term “religious
freedom” is regarded as a desirable goal for all societies and a positive force in social
development. However, when scholars and policy makers advocate religious freedom, which is
commonly defined as freedom to believe, practice, and act in accordance with one’s faith, few
mention the need for government restrictions on certain religious activities that may have
possible negative consequences, for example, the potential for clashes with those of other faiths,
which may result in violence, human dislocations, or negative economic impacts. In this study,
we use newly available data on religious freedom and interference on religious activities to
evaluate how different dimensions of religious freedom and lack thereof affect economic
performance across countries. In light of an examination of these data, we discuss how the
normative stance on religious freedom and government interference on religion should be re-
evaluated.
How Religion Affects the Economy
Ever since the publication of Max Weber’s seminal work The Protestant Ethic and the Spirit of
Capitalism, the impact of religion on economic growth has been at the center of economists’
efforts to understand how culture affects economic growth.1 In general, there are three
4
perspectives on how religion affects economic growth. The first is the Weberian view, which
argues that religious beliefs foster certain traits that are conducive to economic growth. These
traits may include ethics encompassing working hard, practicing thrift, and being honest. The
second perspective can be termed as the social capital approach, which contends that the social
networking resulting from formal religious gatherings create social capital, which in turn
contributes to economic performance. The third view treats religion in a more comprehensive,
sui generis perspective, arguing that all religions are spiritual, focus on the afterlife, and place
great emphasis on god, heaven, and hell. Formal religious activities are a means to teach and
preserve these beliefs, which act as a force to provide incentives to followers to behave in certain
ways, such as to work hard, practice frugality, and to be honest, so as to secure a desirable
afterlife. Whereas the former two approaches regard religion as a positive force in terms of
economic growth, the sui generis view recognizes that frequent participation in formal religious
activities diverts time away from economically productive activities and may thus have a
negative effect on economic growth.2 This suggests that religions can have either positive or
negative effects on the economy. As a result, the impact of religion is both intriguing and
complex. If religion’s effect on economic development is largely positive, then as religious
freedom increases, more religions will flourish and, as a consequence, economic growth will
accelerate. Conversely, if religion is a drag on the economy, then limiting religious freedom will
curtail the growth of religions, which in turn will contribute to economic growth.
What We Know about the Effects of Religious Freedom on the Economy
5
Thus far, there have been relatively few studies on how religious freedom affects economic
growth. In an article for the Journal of Democracy, Alfred Stepan argues on behalf of the
reciprocal needs of both religious freedom and democracy, which he dubs as the “Twin
Tolerations.”3 Freedom of religion requires political freedom and political freedom requires
freedom of religion in order to develop vibrant, multi-voice democracies. Alon and Chase
examine the possible relationships that exist among economic freedom, political freedom,
religious freedom, and individual prosperity, measured by purchasing power parity per capita
GDP.4 Religious freedom is shown to contribute to prosperity above and beyond its
contributions of political and economic freedoms in a large cross-section of society. The above
findings beg the following questions: why and how does religious freedom affect economic
prosperity?
Several pathologies have been suggested and discussed at the Berkley Center for Religion, Peace
and World Affairs of Georgetown University, whose research team is at the forefront of studies
on this topic.5 We will briefly summarize them below. A major argument is from the
institutional perspective. Religious freedom correlates closely with civic, political, and economic
freedoms, making it an integral building block of what we consider a liberal democracy.6
According to Douglass North, institutions can be divided into formal and informal governing
mechanisms.7 Religious freedoms, for example, can be divided, on the one hand, into formal
government regulations and, on the other hand, into informal mechanisms, such as social
attitudes toward religious minorities. This distinction is important with respect to religious
freedom because the formal mechanisms, i.e., government policies and laws, can be shaped
either by the informal mechanisms, such as the culture, or can shape the informal mechanisms.
6
Furthermore, the two mechanisms may clash, causing, among other things, social frictions and
possibly violence, which will be detrimental to economic growth.
With respect to institutional similarities, religious freedoms can contribute to economic growth
through trade and investment. Dolanski and Alon show how religious freedom and religious
diversity affect foreign direct investment.8 Through gravity models, economists have been able
to show that countries that are institutionally similar are more likely to trade with and invest in
one another.9 Religious freedom is a foundation for the institutional similarities. For example,
the 1998 International Religious Freedom Act was passed by the U.S. Congress to promote
religious freedom in U.S. foreign policy. According to this Act, which invokes international and
constitutional law as a justification, the United States may apply sanctions on countries that
engage in religious persecution. According to Joseph Lieberman (D-CT), the United States is
justified in applying the law “because of a belief that no government has the right to tell the
people how to worship and certainly not the right to discriminate against them or persecute them
for the way they chose to express their faith in God.” As the world’s largest investor and
provider of the most foreign aid, the United States puts economic pressure on countries that do
not complying with minimal standards of religious liberty.
Religious freedom promotes religious plurality and diversity. Diversity fosters creativity,
innovation, entrepreneurship, and, in turn, economic development. Societies that welcome
people of diverse backgrounds, including diverse religious backgrounds, tend to attract more
talent. The former Soviet Union is a case in point. In the Soviet Union, there was a quota on the
number of Jews who were allowed to enter elite universities and government bodies, and
7
religious minorities suffered repression, leading to suboptimal allocations of human capital
resources. Although not an official policy, discrimination against the Jews was socially
acceptable. Such discrimination made Jews feel unwelcomed and not fully integrated into the
society. As a result, when the Soviet Union opened under Mikhail Gorbachev, millions of
educated Jews fled to Western Europe, America, and Israel. This massive emigration
represented a brain drain for the Soviet Union and a brain gain for the receiving countries. The
success story of Israel’s “start-up nation” was partly due to the influx of educated immigrants
with technical and engineering degrees from the Soviet Union. Similarly, when the Puritans left
England due to religious persecution, they took with them gifts, arts, and products of the
Commonwealth to the detriment of the Commonwealth and to the benefit of the new colony.10
Religious freedom promotes religiosity because competition among religious associations
increases the market for religious services. The marketization of religion means that more
segments of a society are provided with a larger set of options to express their consciousness.
Regardless of the type of religion, at its core religiosity preaches morality, doing the right thing,
and charity.11 Religions typically ask people to delay immediate gratification for salvation.
Religious organizations teach people business skills that can be transferred to alternative
economic uses.12 Being accountable to a higher being also means that the threshold level for
appropriate behavior, fairness, and justice may be higher than the minimum as mandated by law.
Thus, religiosity may contribute to a more just and sustainable economic development.
In short, existing research seems to concur that religious freedom promotes economic activity,
both directly through institutions and indirectly through religious diversity and religiosity. A lack
8
of religious freedom can reduce the entrepreneurial and economic activities that result from the
traits nurtured by religious beliefs.13
Robinson has equated religious freedom with private property or private enterprises. In this way,
spiritual capital is as important an institutional predictor of economic wealth as financial, natural,
and human capital. He concludes that economic ruin will come to those nations that seize
property or exile citizens due to their religious beliefs. He thus suggests: let history be a lesson
and let us choose freedom and toleration in all areas of social life, including liberty of
consciousness, so that the “invisible hand” and prosperity can symbiotically co-exist.14
Despite the optimism regarding the positive impact of religious freedom on economic growth
and the positive connotations of “freedom” in public policy, the real impact of religious freedom
is more nuanced. The main weakness of existing studies on religious freedom and economic
growth is the failure to recognize that religious freedom has various dimensions and that an
absence of government regulation of religious freedom may have a detrimental effect on
economic activities.
The Effect of Religious Freedom on the Economy Is a Double-Edged Sword
In this study, we use recently available data on religious freedom to expand upon the institutional
approach and to examine the different dimensions of religious freedom, such as interference in
religion, and how they may affect economic growth across a broad cross-section of countries.
9
Our findings shed light on the roles of the various dimensions of religious freedom, how they co-
act with religion to either enhance or to reduce economic performance.
We argue that religions exert both positive and negative effects on economic performance. The
positive effects are produced by traits nurtured by religious beliefs, such as a work ethic, thrift,
and honesty, as well as social networking resulting from religious gatherings. The negative
effects, which are less commonly discussed in the literature, may include frequent religious
activities that divert the attention of the participants from economic activities15 or result in
violent conflicts between religions that incur economic costs and destroy economic value. We
further argue that religious freedom and lack thereof may co-act with religion to affect economic
performance.
What is religious freedom? Most of scholars define it as the right to believe in and practice one’s
religion. For example, Gill and Shah define religious freedom as “the freedom to engage in
public life (as well as private life) on the basis of one’s religious convictions and identity.”16 The
authors go on to further define religious freedom in terms of cost and efficiency: “any increase in
the cost of believing, practicing, and acting on one’s faith decreases religious freedom.
Conversely, anything that decreases those costs increases religious freedom.” In sum, religious
freedom facilitates religious activities and enhances the efficiency of practicing and
disseminating religion. This definition implies that religious freedom should be free of
interference, and any interference on religion tends to increase the cost of practicing and
disseminating religion and thus hinders religious freedom. What this definition misses is the
flipside of religious freedom. The International Covenant on Civil and Political Rights of the
10
United Nations adds the following to address this issue: “No one shall be subject to coercion
which would impair his freedom to have or to adopt a religion or belief of his choice.”17 Like any
freedom, one’s religious freedom, if unchecked, may encroach upon the religious freedom of
others. When this occurs, without the intervention of a third party such as the government,
clashes may turn violent and be detrimental to economic performance. The implication here is
that government regulations on religion, commonly viewed as restrictions on religious freedom,
may be necessary for social (or religious) order and economic efficiency.
In this study, we attempt to examine different institutional dimensions of religious freedom and
to investigate how they co-act with religiosity to affect economic performance. From the
institutional perspective, religious freedom has two dimensions: the first consists of soft,
informal rules, or the religious culture, which facilitates or constrains religious activities; and the
second includes hard, formal rules, such as laws and government regulations regarding religion.
Our theoretical conception fits the recently available data on religious freedom which measure
two variables of religious freedom. We need to point out that the data on religious freedom we
use is actually data on the lack of religious freedom, or interference in religion. The reason is that
most freedoms can only be measured by the degree to which they are restricted. The first
variable is an index of “social hostilities involving religion” (SHI). We use this variable to
measure the informal, cultural aspects of interference on religion or religious freedom. The
second variable is an index of “government restrictions on religion” (GRI). This index measures
governmental laws, policies, and regulations regarding religion and can be used to represent the
formal dimension of interference in religion or religious freedom.
11
SHI essentially measures people’s negative attitudes and behavior toward the religions of others.
It is the opposite of religious tolerance, and an important dimension of religious freedom. Strong
social hostilities involving religion encourage religious and social segregation and fuel religious
conflicts. They increase the costs of religious activities and decrease religious freedom. Such
costs that are incurred by segregation, hatred, and conflicts are also economic costs for a society.
We argue that societies with strong social hostilities involving religion tend to have slower
economic growth. Thus, religious social toleration is a precondition for economic stability and
growth.
GRI measures the limitations imposed on or support for certain religious activities by the
government in terms of its laws, policies, and regulations. The role of GRI on economic growth
is more complicated than that of SHI. As we showed earlier, conventional wisdom tends to
emphasize the right to practice and proselytize one’s religion, and thus overlook the need to
protect the right of someone not to believe or be converted. Thus, government restrictions on
religion tend to be viewed as exerting a negative force that reduces religious freedoms.
However, in a market for religion where different religions compete for followers and social and
economic resources, unregulated and unrestrained religious freedoms by all religions may
eventually lead to a "war of all against all."18 Huntington also warned of the potential for
violent conflict along religious fault lines.19 In this sense, certain governmental restrictions on
religious freedoms are justified as they are “necessary to protect public safety, order, health, or
morals or the fundamental rights and freedoms of others.”20 We conjecture that under certain
circumstances GRI, or certain aspects or dimensions of GRI, may exert a positive influence on
12
economic performance, analogous to a free economy that is fairly and efficiently regulated by
the government.
With this background and theoretical reasoning, we set out to examine how the two dimensions
of interference in religion and religious freedom affect economic growth. In the next section, we
run a number of multivariate regressions for a cross-section of countries in order to examine the
relative impacts of the two types of religious freedom indicators, while controlling for religion
and other economic predictors. Based on our theory, we expect that SHI will have a positive
impact on economic growth, but GRI will have a mixed impact on economic growth.
Empirical Test and Findings
Data
The dependent variables tested are Gross Domestic Product Growth Rate (GDP_growth) and Per
Capita Gross Domestic Product Growth Rate (GDP_PC_growth). We used market prices based
on constant local currency and took the five-year average from 2008 to 2012 for each of the
variables. These two variables are derived from the World Development Indicators (WDI).21
Social Hostilities Involving Religion Index (SHI), Government Restrictions on Religion Index
(GRI), and its individual items were collected from the Rising Tide of Restrictions on Religion
Survey.22 We took the value from 2010, the most recent available year. SHI is between 0 (least
social hostilities) and 10 (most social hostilities). GRI also ranged from 0 (least government
restrictions) to 10 (most government restrictions). (More details on SHI and GRI follow.)
13
The individual religious makeup of each country (Christian%, Muslim%, Buddhist%, Hindu%
etc.), and Religious Diversity Index (RDI) were taken from the Global Religious Diversity
Research.23 This research examined the percentage of the population that belonged to eight major
religions in year 2010, including Christian, Muslim, Buddhism, Hindu, unaffiliated, folk religion,
Judaism, and other religions. The RDI is calculated from the percentages of eight religious
groups, ranging from 0 (least diversified) to 10 (most diversified). In this study, we created
several variables to better measure the influence of a single dominant religion (Christian50,
Muslim50, Buddhism50, Hindu50, etc.) and overall religious dominance (Dominant). A single
dominant religion is a dummy variable. If 50 percent or more of the population of a country
believes in a single religion, then the value of the dummy is 1, otherwise 0. For example,
Christian50 equals 1 if the population of a country is over 50 percent Christian. Given this
definition, we are able to test the impact of the dominance of a single religion for all major
religions. Several countries were excluded from the sample because they had no single religion
higher than 50 percent. Only one country has Jewish50 at 1, which is Israel. Thus, Dominant is a
dummy variable, equal to 1 if Christian50=1 or Muslim50=1 or Hindu50=1 or Buddhist50=1 or
Jewish50=1, and 0 otherwise.
In this study, we controlled for the influence of income level (GNI_PC_PPP) on economic
growth. It is computed as the average gross national income (GNI) per capita based on
purchasing power parity (PPP) for the five years: 2008 to 2012 (Unit: thousand dollars). This
variable was collected from the WDI in 2013. Edu Index is controlled in this study as an
indicator of human capital. We use the Education index in 2011 from International Human
14
Development Indicators developed by United Nation. It is a normalized value, ranging from 0 to
1. We also controlled economic freedom index in 2011 published by The Wall Street Journal and
The Heritage Foundation. Economic freedom is on a scale of 0 (least free) to 100 (most free).
Findings
The effects of social hostilities involving religion (SHI). SHI is an index based on 13 survey
questions on social hostilities involving religion, covering subjects ranging from crimes,
malicious acts, or violence motivated by religious hatreds or biases, frictions and tensions among
religious groups, and religion-related wars or terrorist activities. All of these increase the costs of
practicing religion for those religious groups that are adversely affected and thus should be
viewed as leading to a reduction in religious freedom. Throughout our analyses, it is clear that
SHI is negatively correlated with economic growth. The negative effect of SHI is statistically
significant in Model 1 & 3 of Table 1. The lack of socially-based religious freedom breeds hatred
and conflicts and is related to all sorts of atrocities. Social intolerance to other religions is also an
economic liability weighing on the ability of a country to achieve consistent economic growth.
Table 1 – Regressions of Religious Freedom on Economic Growth