Religious leaders and rule of law

In this paper, we provide systematic evidence of how historical religious institutions affect the rule of law. In a difference-in-differences framework, we show that districts in Pakistan where the historical presence of religious institutions is higher, rule of law is worse. This deterioration is economically significant, persistent, and likely explained by religious leaders gaining political office. We explain these findings with a model where religious leaders leverage their high legitimacy to run for office and subvert the Courts. We test for and find no evidence supporting several competing explanations: the rise of secular wealthy landowners, dynastic political leaders and changes in voter attitudes are unable to account for the patterns in the data. Our estimates indicate that religious leaders expropriate rents through the legal system amounting to about 0.06 percent of GDP every year.