Religion has had a far greater influence on economic development than many economists have recognised, according to a new study examining why some nations prosper while others struggle.
The research argues that religious beliefs, institutions and practices have shaped everything from education and financial systems to family size, technological innovation and political institutions, leaving a lasting imprint on economic performance across the world.
It was published by RFBerlin in May and based on a review by economists Professor Sascha Becker of the University of Warwick, Professor Jared Rubin of Chapman University and Professor Ludger Woessmann of the University of Munich.
The study challenges conventional economic theories that focus primarily on investment, technology and human capital, to contend that religion has often operated behind the scenes, influencing the very factors economists use to explain growth.
“Religion affects economic growth not just through individual beliefs, but by shaping the fundamental institutions and norms that govern society,” it says.
One of the clearest examples highlighted in the research is the impact of the Protestant Reformation on education.
Martin Luther's conviction that ordinary believers should be able to read Scripture for themselves encouraged the establishment of schools throughout Protestant regions of Europe. By the 19th century, Protestant areas of Prussia had significantly higher literacy rates than neighbouring Catholic regions.
This educational advantage helps explain why Protestant regions often experienced stronger economic development, challenging the famous theory of sociologist Max Weber, who linked Protestant prosperity primarily to a unique “Protestant work ethic”.
The influence reached far beyond Europe.
Protestant missionaries established schools across Africa, Asia and Latin America, and regions where they continue to demonstrate advanced literacy rates and stronger educational mobility generations later.
The study examined how religious teachings have affected financial systems. Both Christianity and Islam historically imposed restrictions on lending money at interest. While workarounds eventually developed, the researchers argue that these limitations influenced the development of banking and commerce for centuries. In particular, regions with a long history of Ottoman rule continue to lag behind neighbouring areas in banking penetration by about 10%.
The report suggests that religious institutions have at times encouraged innovation and at other times slowed it. One example cited is the Ottoman Empire's prohibition on printing in Arabic script for 250 years, which researchers say delayed the spread of knowledge.
By contrast, areas with greater religious diversity often experienced higher rates of innovation, with late-19th-century Prussian cities showing stronger patent activity where different religious groups lived side by side.
The relationship between religion and education emerged as one of the study's most important themes.
While some religious traditions such as mainstream Protestantism or traditional Judaism helped cultivate literacy and numeracy skills that later contributed to economic prosperity, the researchers argue that other forms of religious education such as madrasas or ultra-Orthodox yeshiva sometimes prioritised theological instruction at the cost of skills valued in the wider economy.
The authors caution, however, that the relationship is complex and varies significantly between traditions, historical periods and local contexts.
Religious beliefs were also found to influence family life and population growth. In 19th-century Europe, Protestant regions generally experienced lower birth rates than Catholic areas, partly because of greater emphasis on education.
The researchers argue that these demographic shifts helped create conditions for long-term economic growth.
The report suggests that while policymakers should pay closer attention to religion when addressing modern economic challenges, governments often treat religion as a background cultural factor rather than recognising its continuing influence on education, finance, family life and public institutions.
Examples from countries such as Egypt and Turkey demonstrate how attempts to reduce the influence of religion through educational reforms sometimes produced the opposite effect, strengthening religious movements rather than weakening them.
The study also highlights the importance of religious freedom and tolerance. According to the researchers, societies that accommodate religious diversity often benefit from a wider exchange of ideas and greater innovation, while religious persecution can destroy valuable skills, networks and human capital.
Although much of the existing research focuses on Christianity, Judaism and Islam, the authors acknowledge that less is known about the economic impact of other major faith traditions, including Buddhism, Hinduism and Confucianism.
Nevertheless, they conclude that religion cannot be ignored in discussions about economic development.
“The central lesson is clear: The conventional growth literature’s neglect of religion represents a significant gap,” the report states.
The study concludes that any serious attempt to understand why some countries become prosperous while others remain poor must take account of the powerful role religious beliefs and institutions have played in shaping societies.
