Religious freedom is an end in of itself, desirable because it enables greater human flourishing. However, it was also part of a package of reforms that were associated with the rise of modern liberal states and economic growth. This chapter asks whether religious freedom was good for economic growth. We focus on the relationship between religious minorities and long-run economic development.
Specifically, we focus on the case of Jewish communities and city growth, as this allows the use of econometric techniques to undercover a causal relationship between the presence of a religious minority and subsequent economic growth. We find a strong relationship between a city having a Jewish community and urban growth in the subsequent century. This growth premium is driven primarily by the period after 1600.
We argue that the most persuasive interpretation of the results is that Jews brought tangible economic skills to the cities in which they settled including financial services, access to trading networks, and higher human capital. However, under identity rules, the benefits associated with these skills were often captured by political elites (Chapter 4). Moreover, restrictions on Jewish participation in trade and commerce attenuated the positive growth effect of a Jewish community. However, as cities abandoned identity rules and moved toward more liberal economic regimes, they reaped the rewards of having a Jewish community.
Interest in the role played by religiousminorities in economic development goes back to the work of Max Weber, who identified the spirit of capitalism with Calvinists who viewed worldly success as a sign that they were part of the elect. Subsequent scholars such as Fernand Braudel observed that religious minorities such as Jews, Armenians, Parsees, Russian Old Believers, and Christian Copts played crucial roles in long-distance trade throughout the preindustrial world.
One example are the French Protestants who fled France after the revocation of the Edict of Nantes in 1685. Approximately 16,000 to 20,000 Huguenots went to Prussia. Many were skilled workers and they brought with them technical know-how unavailable in Prussia. Hornung (2014) found that they substantially increased firm productivity in the locations where they settled.
Another example are the Quakers, who suffered severe persecution prior to 1688 but played an important role in British economic development after 1700.