Religion: Productive or Unproductive?

Abstract

In this paper we investigate the relationships between informal institutions – proxied for by measures of religiosity – and levels of entrepreneurial activity, both productive and unproductive, using cross-section U.S. state level data. In doing so, we evaluate Baumol’s (1990) conjectures on the role of institutions in determining whether entrepreneurs will channel their efforts towards wealth-generating activities or towards zero- or negative-sum rent-seeking. We distinguish between measures of both the belief (e.g., the frequency of prayer) and belonging (e.g., church attendance) that has been stressed by authors such as Barro and McCleary (2003). We find that several religious variables significantly and negatively correlate with a state’s productive entrepreneurship score. Alternatively, most religious variables in our data do not correlate significantly with unproductive entrepreneurship. We also find that the percent of individuals reporting as atheist/agnostic is positively associated with productive entrepreneurship.