Do markets overcome repugnance? Muslim trade response to anti-Muhammad cartoons

Abstract

What is the effect of religious beliefs on economic choices? And in light of this effect, what is the cost of free speech? After Danish newspapers published anti-Muhammad cartoons, the religious status of trade with Denmark changed exogenously in Muslim countries. Exports from Denmark to Muslim countries decreased by 31%, while close substitute countries like Finland gained export share. Final goods were more affected than intermediate goods, as were more religious Muslim countries. Denmark did not shift exports to other countries, but trade quantity rebounded in 20 months. Notably, Muslim exports to Denmark were unaffected, which is consistent with money overcoming repugnance.