More than 500 years after its humble beginnings as a religious movement, the Protestant Reformation continues to act as a potent economic force in Europe.
According to new research from two prominent economists, the movement’s dramatic improvements to literacy and education are directly linked with increases in labor productivity, entrepreneurship, business competition and other forces that still drive the continent’s economy—the largest and wealthiest in the world in 2018.
Combining original research and a review of literature, this working paper provides new evidence of a direct link between Protestantism and Europe’s economy.
“We found strong evidence tying the continent’s vast wealth and high living standards to Protestantism, even 500 years on,” said Roman Sheremeta, co-author of the paper and an assistant professor of economics at the Weatherhead School of Management at Case Western Reserve University.
The paper was co-authored by 2002 Nobel Prize-winner Vernon L. Smith, a Chapman University economics professor.
“This movement unleashed forces that resulted in technological innovation, knowledge creation and influenced people to be healthier and make more stable personal decisions—all factors clear in evidence we linked to better economic outcomes in Europe,” Sheremeta said.
“Still, future growth is never guaranteed. It’s useful to identify what led Europe here,” Sheremeta added, “as it charts an uncertain future tied to the deep debts of some of its individual countries and an economy increasingly global in nature.”
A recent wave of Reformation-era document digitization allowed researchers to find this causal relationship—when a variable directly affects another—between the religious movement and positive economic growth in Europe.
Opening exchange of ideas—and flow of goods
In 1517, Martin Luther ushered in the Reformation by posting his Ninety-Five Theses to a church door in Germany. Within a decade, groups formed that became the Lutherans, Methodists, Baptists and other Protestant denominations united in the belief of common literacy, so Christians could read the Bible.
“Religious freedom has been shown to promote the protection of civil and human rights, including freedom of speech, press and assembly,” Sheremeta said. “These rights are essential for the exchange of ideas—a very important component of a growing economy.”
Until the Reformation, the Roman Catholic Church had essentially established a religious monopoly in Western Europe, largely backed by state powers to enforce its claims and punishing heretics.
“These barriers prevented the entry of rival ideas,” Sheremeta said. “It’s well-documented that religious monopolies are associated with slow economic growth, higher rates of poverty and corruption—and lower competition, a key force to innovation.”
While a consensus among economists and social scientists about a strong relationship between the Reformation and Europe’s economic growth already existed, the particular pathways of this relationship have largely lacked empirical evidence until recently.
This research is included as a chapter in a new book written to celebrate the 500th anniversary of the Protestant Reformation in Ukraine, which was commissioned by its president and edited by Sheremeta.
For more information, contact Daniel Robison at daniel.robison@case.edu.