Islamic Law, Western European Law and the Roots of Middle East's Long Divergence: a Comparative Empirical Investigation (800-1600)

We examine the contribution of Islamic legal institutions to the comparative economic decline of the Middle East behind Latin Europe, which can be observed since the late Middle Ages. To this end, we explore whether the sacralization of Islamic law and its focus on the Sharia as supreme, sacred and unchangeable legal text, which reached its culmination in the 13th century had an impact on economic development. We use the population size of 145 cities in Islamic countries and 648 European cities for the period 800-1800 as proxies for the level of economic development, and construct novel estimates of the number of law schools (i.e. madaris) and estimate their contribution to the pre-industrial economic development. Our triple-differences estimates show that a higher density of madrasas before the sacralization of Islamic law predicts a more vibrant urban economy characterized by higher urban growth. After the consolidation of the sharia sacralization of law in the 13th century, greater density of law schools is associated with stagnating population size. We show that the economic decline of the Middle East can be partly explained by the absence of legal innovations or substitutes of them, which paved the way for the economic rise of Latin Europe, where ground-breaking legal reforms introduced a series of legal innovations conducive for economic growth. We find that the number of learned lawyers trained in universities with law schools is highly and positively correlated with the western European city population. Our counterfactual estimates show that almost all Islamic cities under consideration would have had much larger size by the year 1700 if legal innovations comparable to those in Western Europe were introduced. By making use of a series of synthetic control and difference-in-differences estimators our findings are robust against a large number of model specification checks.