Believing and Practicing: How Religion Shapes Human Capital and Growth

We develop a dynamic model in which individuals allocate time between work and religious activities, and parents invest in their children's human capital and religious belief. The model delivers, in a unified framework, the two empirical regularities documented by Barro and McCleary (2003) and McCleary and Barro (2019): controlling for religious activities, stronger belief raises economic growth because it raises human capital investment; controlling for belief, more time spent on religious activities lowers growth by crowding out labor supply. While the labor-supply margin is individually optimal, the human-capital margin is not: parents do not internalize that greater human-capital investment crowds out future religious transmission through the socialization channel, leading to inefficiently high human capital in equilibrium under strong socialization externality.