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

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  • S. Michalopoulos
  • A. Naghavi
  • G. 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 theory 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 bene.cial 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.

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  • S. Michalopoulos & A. Naghavi & G. Prarolo, 2010. "Trade and Geography in the Economic Origins of Islam: Theory and Evidence," Working Papers 700, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:700
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    Cited by:

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    2. 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.
    3. Fenske, James, 2015. "African polygamy: Past and present," Journal of Development Economics, Elsevier, vol. 117(C), pages 58-73.
    4. 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.
    5. Fenske, James, 2015. "African polygamy: Past and present," Journal of Development Economics, Elsevier, vol. 117(C), pages 58-73.

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    More about this item

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • F10 - International Economics - - Trade - - - General
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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