Holy cows and spilled milk: The impact of religious missions on firm-level productivity

Did religious missions influence firm-level productivity? This study examines the impact of the Inner Mission (IM) movement on productivity in early twentieth-century Denmark, a predominantly Protestant and homogeneous society undergoing rapid industrialization. Using data on 964 creameries and employing an instrumental variables approach, we provide evidence that IM intensity reduced productivity in butter production, measured by the Milk-to-Butter ratio. The main mechanisms were Sunday closures, which disrupted economies of scale, and the fragmentation of creameries due to doctrinal disagreements among farmers. These disruptions prevented creameries from operating efficiently and reduced their profitability. Our results show how religiosity shaped patterns of modernization and industrial development absent the usual colonial or missionary confounders. This historical case speaks to debates in development economics about how informal institutions and moral regulation can constrain firm behavior and productivity.