Human Capital and Protestantism: Micro Evidence from Early 20th - PDF document

Human Capital and Protestantism: Micro Evidence from Early 20th Century Ireland Alan Fernihough ∗ Stuart Henderson † The Weberian thesis (Weber, 1904/05), which famously attributed the rise of Western capitalism to Protestantism, has attracted considerable academic criti- cism in the century following its publication (Tawney, 1926; Fischoff, 1944; Samuels- son, 1957). Much of this criticism has centred on Weber’s Protestant-ethic expla- nation for religious variation in economic outcomes, which emphasised a specific work-ethic and thrift as conducive to Protestant affluence. While this causal path- way has been largely downplayed (Delacroix and Nielsen, 2001; Andersen et al., Forthcoming), the classic Weberian connection between religion and economy nev- ertheless continues to attract empirical support (Grier, 1997; Barro and McCleary, 2003; Noland, 2005), with recent scholars instead proposing a variety of alternative mechanisms through which any religious effect may operate. 1 Perhaps most prominent in the Protestant case has been the Becker and Woess- mann (2009, 2010) human capital interpretation of Protestant economic history. Looking to nineteenth-century Prussia, they suggest Protestants prospered not be- cause the Reformation marked a psychological watershed as Weber advocated, but instead due to a new emphasis on reading the bible for oneself. This, they argue, promoted human capital gains, with the resultant literacy difference explaining almost the entire gap in economic outcomes between the Christian denominations. Yet, more recently Boppart et al. (2014) raise the possibility that Protestant moti- vation went beyond the acquisition of reading skills. Using the results of pedagogi- cal examinations from late nineteenth-century Switzerland, they show Protestants ∗ Queen’s Management School, Queen’s University Belfast, Belfast BT9 5EE, United Kingdom. Email: a.fernihough@qub.ac.uk. † Queen’s University Belfast. 1 For example democracy (Woodberry, 2012), knowledge diffusion (Bai and Kung, 2015), social ethic (Arru˜ nada, 2010), and trust (La Porta et al., 1997). 1

led in a variety of cognitive areas including reading, writing, history and maths. Indeed, while their study reveals a specific Protestant motivation to accrue read- ing ability, the authors emphasise wider Protestant investment in other education areas in line the broader educational goals of the main reformers. We contribute to this wider literature by using a large sample of individual-level data from the full population census of Ireland in 1911 to estimate the relationship between Protestantism and human capital. Our focus on the Irish population at the start of the 20th century has four key advantages. Firstly, by utilising the household returns of the 1911 census we are able to focus the individual-level re- lationship between Protestantism and human capital. As such, we extend on the aforementioned studies, which utilise aggregate-level data, and thereby amelio- rate concerns about the ecological fallacy problem wherein the inference of aggre- gate level data may be inconsistent with patterns observed at the individual level (Robinson, 1950; Selvin, 1958). The absence of individual-level data estimating this relation was highlited in a recent survey paper by Becker et al. (Forthcom- ing). Secondly, we are able provide coverage for the entire population, and so mitigate biases connected with population samples and alternative sources to the census. However, we limit our analysis to household heads, to avoid issues relating to the reporting of other individuals’ characteristics (Blum et al., Forthcoming). Thirdly, the individual returns from the 1911 Irish census contain a wealth of demographic and geographic information. Unlike other censuses, the Irish census surveyed respondents’ religious affiliation and literacy. Additionally, these data are rich enough and permit us to use a battery of demographic control variables such as street-level fixed effects, surname (thus capturing genetic differences) fixed effects, and occupation fixed effects. Finally, as a region Ireland should be of particular interest to scholars interested in the relationship between human capital and reli- gion. The Protestant Reformation largely failed in Ireland although its legacy was to leave a considerable minority population. Whilst this population tended to be wealthier and spatially concentrated in the North-East, these correlations were far from perfect. Thus, the Irish context provides substantial in-sample variation for us to explore econometrically. Our analysis reveals that religion is a persistent factor in both literacy and age- heaping based estimates of numeracy. We find that Catholics are around 6 per 2

cent less likely to be fully literate than their Protestant counterparts and around 4 per cent more likely to age heap. These effects are robust to the inclusion of a large number controls designed to offset any potential confounding bias. Furthermore, these results are reasonably stable amongst a host of population subgroups. The spread of Protestantism within Ireland was heavily influenced by British planters in the early modern period and, by extension, proximity to Britain. An instrumental variable (IV) analysis that uses plausibly exogenous variation created by distance to the nearest major British port in the early modern period, produces nearly identical coefficients to the aforementioned. We also find some evidence of intra- Protestant denominational differences as the literacy effect appears to be stronger amongst nonconforming Presbyterians and Methodists compared to those in the Church of Ireland. However, this finding is not replicated when Age-heaping is used as the measure of human capital. The consistent gap in both literacy and age-heaping propensity we find be- tween Irish Catholics and Protestants complements an existing literature which has underscored the role of religion in the historical diffusion of human capital. At the macro level, such scholarship tends to emphasise a distinct change in the educational motivations of a specific religious group in facilitating long-run hu- man capital divergence. For example, in the Christian case, this manifested in the Protestant Reformation, which placed a new emphasis on bible reading, and pro- vided an important catalyst in the spread of mass schooling (Landes (1999, p. 178) and Woodberry (2011, pp. 113–115)), while within Judaism, changing religious norms from the second century CE resulted in greater investment in education, and facilitated Jewish transition into more advanced occupations (Botticini and Eckstein, 2007). Yet as emphasised in further work, the exact response of human capital to religious influence may depend on a variety of time and space specific factors such as denominational nuances (McCleary, 2013; Ak¸ comak and ter Weel, 2016), the political influence of religious elites (Chaney, 2016), competition (Gal- lego and Woodberry, 2010), and conservatism (Boppart et al., 2013). Indeed, in the Irish case, the role of religion appears to be as a channel for the transmission of distinct cultural traditions—originating in the differing ethno-national origins of the Catholic and Protestant populations, but perpetuated by the institutional organisation of society along religious lines. 3

In the next section we provide historical context and hypothesise why religious variation in literacy and age-heaping propensity may exist in the Irish case. Fol- lowing that, the paper proceeds as follows: Section 2 summarises our data source, Section 3 presents our results, and Section 4 provides discussion and conclusion. 1 Historical Context 1.1 Measuring Historical Human Capital Given that human capital underlies modern theories of economic growth (Galor, 2005; Romer, 1990) the ability to evaluate human capital acquisition in historical societies provides a promising means to advance our understanding of development through time and space. Assessing such endowments in modern settings is rela- tively unproblematic given the variety and sophistication of measures available, but for historians such conventional sources (such as the highest academic qual- ification achieved or number of years schooling) have to be substituted by more simple and novel means. In this study we focus on two such measures: literacy and age-heaping. For the purposes of this study individuals are regarded as “literate” if they indicate that they can both read and write. The advantage of using literacy is that it is arguably the most important and foundational measure of human capital. Another advantage is that illiteracy was still prevalent in early-twentieth century Ireland, thus giving us the necessary in-sample variation. The emergence of literacy in Western societies at the end of the 19th century is consistent with the use of literacy as a measure of human capital as this rise in literacy appeared to go hand in hand with the growth of state-sponsored school systems and compulsory schooling legislations. Consequently, this link has be used by a number of scholars interested in the link between human capital and economic development (Becker and Woessmann, 2009; Sachs and Warner, 1997; Galor and Moav, 2004). The disadvantage of using literacy as a measure of human capital is the vari- able’s limited nature. Firstly, it is discrete and does not capture any differences in reading or writing ability amongst the literate population. Secondly, it only provides evidence on one dimension of human capital and does not inform us 4