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Journal article
Religious competition and reallocation: The political economy of secularization in the protestant reformation
Davide Cantoni, Jeremiah Dittmar and Noam Yuchtman November 2018

Quarterly Journal of Economics 133(4), 2018
DOI: 10.1093/qje/qjy011

Using novel microdata, we document an important, unintended consequence ofthe Protestant Reformation: a reallocation ofresources from religious to secular purposes. To understand this process, we propose a conceptual framework in which the introduction of religious competition shifts political markets where religious authorities provide legitimacy to rulers in exchange for control over resources. Consistent with our framework, religious competition changed the balance of power between secular and religious elites: secular authorities acquired enormous amounts of wealth from monasteries closed during the Reformation, particularly in Protestant regions. This transfer of resources had significant consequences. First, it shifted the allocation of upper-tail human capital. Graduates of Protes- tant universities increasingly took secular, especially administrative, occupations. Protestant university students increasingly studied secular subjects, especially degrees that prepared students for public sector jobs, rather than church sector specific theology. Second, it affected the sectoral composition of fixed investment. Particularly in Protestant regions, new construction shifted from religious toward secular purposes, especially the building of palaces and administrative buildings, which reflected the increased wealth and power of secular lords. Reallocation was not driven by preexisting economic or cultural differences. Our findings indicate that the Reformation played an important causal role in the secularization of the West.

DOI: 10.1093/qje/qjy011