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Is Islam Compatible with Free-Market Capitalism? An Empirical Analysis, 1970–2010

  • Indra de Soysa (a1)


Are majority-Muslim countries laggards when it comes to developing liberal economic institutions? Using an Index of Economic Freedom and its component parts, this study finds that Muslim-dominant countries (>50% of the population) are positively associated with free-market capitalism. Protestant dominance is also positively correlated, but the association stems from just two components of the index, mainly “legal security and property rights protection.” Surprisingly, Protestant countries correlate negatively with “small government” and “freedom to trade,” two critical components of free-market capitalism. Muslim dominance shows positive correlations with all areas except for “legal security and property rights.” The results are consistent when assessing similar variables measuring property rights and government ownership of the economy collected by the Varieties of Democracy Project. Capitalistic policies and institutions, it seems, may travel across religions more easily than culturalists claim.

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Corresponding author

Address correspondence and reprint requests to: Indra De Soysa, Norwegian University of Science and Technology, N-7491 Trondheim, Norway. E-mail:;


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I am extremely grateful for comments received at the International Studies Association's convention in San Francisco in April 2018. I am particularly grateful to Jon Chow, Bobby Braithwaite, Monica Toft, Niklas Potrafke, Krishna Vadlamannati, and Jonathon Moses for extremely useful comments and suggestions on an earlier draft. Only I am to blame for any remaining errors.



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