AP/Mohammed Ballas

Economic success may be tied to the fact that not all of your neighbors are celebrating the same winter holiday as you.

The holiday season is a time when people all over the world reflect on the role of religion in their lives. But how does religion, and especially religious diversity, affect our economies?

I decided to take a look using data from the Pew Research Center’s Religion & Public Life Project on “global religious diversity.” The Pew data track the level of religious diversity, measured as the percentage of the population that belongs to eight major religious groups in countries around the world. These include the five major world religions—Buddhism, Christianity, Hinduism, Islam, and Judaism—which account for about three-quarters of the world’s population, as well folk or traditional religions, the religiously unaffiliated (atheists, agnostics, etc.), and other religious groups (Baha’i, Sikhism, Taoism, etc.). The study ranked countries on a 1 to 10 scale based on their having a more equal share of these religious groups.

The map above, from the report, shows the pattern of religious diversity worldwide. There are some surprises here. Though the countries with the least religious diversity are obviously the least secular—Vatican City, Afghanistan, and Iran are all near the bottom of the list—religious diversity or pluralism clearly does not result in secular values. Six of the twelve countries that scored very highly on their diversity ranking are in the Asia-Pacific region: Singapore, Taiwan, Vietnam, South Korea, China, and Hong Kong. Five more are in sub-Saharan Africa—Guinea-Bissau, Togo, the Ivory Coast, Benin, and Mozambique. South America’s Suriname rounds out the top dozen.

With the help of my Martin Prosperity Institute (MPI) colleague Charlotta Mellander, I dug a little deeper into the ways that religious diversity might be associated with economic performance. As usual, I note that correlation does not imply causation, and ultimately one would want to control for the effects of religious diversity alongside other variables in multivariate analysis. Still, five key findings jump out from this analysis.

  • First and foremost, religious diversity is associated with the overall productivity and economic competitiveness of nations. Religious diversity is positively associated with total factor productivity (.32) based on World Bank measures and overall economic competitiveness (.56) as ranked by the World Economic Forum. It is also associated with higher levels of entrepreneurship (.37) based on the Global Entrepreneurship Monitor rankings.
  • Pluralism is also associated with more urbanized societies, with a positive correlation to national levels of urbanization (.31).
  • Religious diversity tracks key markers of social tolerance. It is positively correlated to the Gallup survey responses on the acceptance of racial and ethnic minorities (.45) and the acceptance of gays and lesbians (.31). There is an even stronger relationship between religious diversity and the treatment of women based on the UN’s Gender Inequality Index, where more gender equal nations also have more religious diversity (.55).
  • Pluralism is tied up with the broad shift to a post-industrial knowledge-based economy, as it is positively correlated with share of workers in the creative class (.42).
  • Finally, pluralism is associated with the overall the happiness and well-being of nations. It is positively correlated with Gallup’s overall measure of life satisfaction (with a correlation of.32) and even more so with the United Nations’ assessment of overall human development (.38).

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Our findings are in line with those of political sociologist Ronald Inglehart, whose detailed World Values Survey sees innovation and economic growth tied to a broader shift away from conventional religious values and towards more modern, secular, post-materialist values which value self-expression. They contrast with longer held views dating back to sociologist Max Weber, who argued that economic growth in Western Europe was spurred by the “Protestant ethic” of thrift, hard work and diligence. Detailed empirical studies by economists Robert Barro and Rachel McCleary also found that nations with higher rates of religious beliefs have higher rates of economic growth, mainly because religious beliefs help spur higher individual productivity [PDF]. But they also note that church attendance itself depresses growth, and that fear of hell tends to be a more important economic growth factor than the prospect of heaven.

Interestingly, a recent study [PDF] by Adam Okulicz-Kozaryn of Harvard University finds that religiosity depresses innovation across all 3000-plus U.S. counties. He finds that more religious counties are less innovative and creative. He measures religiosity based on the size of religious congregations and the density of churches, and compares that to rates of patenting and the share of the workforce that are members of the creative class. He finds relationships between religious congregations and both innovation and the creative class, as well as between church density and innovation. (There was a moderate relationship between church density and the creative class.)

The connection (of lack thereof) between religion and innovation becomes even clearer when Okulicz-Kozaryn delves into the patterns across different types of cities and metro areas. He finds the San Francisco Bay Area, Portland and Seattle to be in the bottom tertile on religiosity and the top tertile on creativity. By contrast, Northern Texas was religious and uncreative. The Northeast exhibited a less clear pattern – perhaps, Okulicz-Kozaryn conjectures, because of relatively large concentrations of Irish, Italian and Hispanic Catholic immigrants. Ultimately, he concludes that “religious counties remained less creative, even controlling for education, income, political orientation, urban-rural continuum, and prevalent industry.”

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Many pundits and social scientists continue to discount the economic role of diversity, turning instead to more standard economic variables like technology and education. Those things clearly matter, but the diversity and openness of a society do as well. Our analysis finds that diversity is associated with economic competitiveness, entrepreneurship, and key measures of talent and human capital.

Of course, this relationship likely goes both ways, as higher levels of economic development and human capital are likely to be associated with greater tolerance and diversity. That said, openness to diversity is also likely to help prompt economic development by encouraging innovation and enabling societies to better attract and tap into a wide range of talent across lines of gender, ethnicity, nationality, and religion.

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