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Trade and Geography in the Economic Origins of Islam: Theory and Evidence

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  • Stelios Michalopoulos
  • Alireza Naghavi
  • Giovanni Prarolo

Abstract

This research examines the economic origins of Islam and uncovers two empirical regularities. First, Muslim countries, virtual countries and ethnic groups, exhibit highly unequal regional agricultural endowments. Second, Muslim adherence is systematically larger along the pre-Islamic trade routes in the Old World. The teory argues that this particular type of geography (i) determined the economic aspects of the religious doctrine upon which Islam was formed, and (ii) shaped its subsequent economic performance. It suggests that the unequal distribution of land endowments conferred differential gains from trade across regions, fostering predatory behavior from the poorly endowed ones. In such an environment it was mutually beneficial to institute a system of income redistribution. However, a higher propensity to save by the rich would exacerbate wealth inequality rendering redistribution unsustainable, leading to the demise of the Islamic unity. Consequently, income inequality had to remain within limits for Islam to persist. THis was instituted via restrictions on physical capital accumulation. Such rules rendered the investments on public goods, through religious endowments, increasingly attractive. As a result, capital accumulation remained low and wealth inequality bounded. Geography and trade shaped the set of economically relevant religious principles of Islam affecting its economic trajectory in the preindustrial world. Creation-Date: 2010

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Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0750.

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Handle: RePEc:tuf:tuftec:0750

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Keywords: Religion; Islam; Geography; Physical Capital; Human Capital; Land Inequality; Wealth Inequality; Trade.;

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Cited by:
  1. Eric Chaney, 2012. "Democratic Change in the Arab World, Past and Present," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 363-414.
  2. Paolo Buonanno & Ruben Durante & Giovanni Prarolo & Paolo Vanin, 2012. "Poor institutions, rich mines: resource curse and the origins of the Sicilian mafia," Working Papers 2012/29, Institut d'Economia de Barcelona (IEB).
  3. James Fenske, 2012. "African Polygamy: Past and Present," Economics Series Working Papers WPS/2012-20, University of Oxford, Department of Economics.
  4. Buonanno, Paolo & Durante, Ruben & Prarolo, Giovanni & Vanin, Paolo, 2011. "On the historical and geographic origins of the Sicilian mafia," MPRA Paper 37009, University Library of Munich, Germany, revised 01 Feb 2012.
  5. Jérôme Hergueux, 2012. "How does Religion Bias the Allocation of Foreign Direct Investment? The Role of Institutions," Working Papers of LaRGE Research Center 2012-06, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg (France).

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