ISLAM AND POLITICAL ECONOMY A Study of the Influence of Religiosity and Religiously Motivated Attitudes on Macroeconomic Performance in Countries with Substantial Muslim Presence

This thesis consists of three empirical chapters studying the relationship be- tween religion and political economy for a sample of countries with substantial Muslim presence. Chapter one is a study of the relationship between religiously motivated at- titudes and FDI for a panel of predominantly Muslim countries over a period of ten years stretching from 1997 to 2006. Instrumenting for the attitude variables, I �nd that countries with more progressive attitudes towards women and higher levels of openness towards foreigners tend to be more attractive to FDI. Chapter two examines the relationship between Islam and economic growth for a panel of countries with substantial Muslim presence over the period 1990-2008. Using instrumental variables, I show that higher levels of religiosity, measured by belief and attendance, depress economic growth. Following up on the �ndings of chapters two and three, in chapter three I inves- tigate how di�erent patterns of religious behaviour map onto economically relevant attitudes for a sample of individuals from predominantly Muslim countries. The empirical �ndings suggest that religiosity in predominantly Muslim countries is associated with conservative attitudes towards women, and intolerance towards strangers. On the other hand, religiosity is found to be associated with con�dence in state institutions, the respect of law, and pro-market attitudes. Testing for the in uence of September 11 on religiosity, I �nd that Muslims after 2001 are more religious. In this thesis I �nd that religion negatively in uences FDI by encouraging conservative attitudes towards women and intolerance towards foreigners. These attitudes are also plausible channels through which the negative in uence of reli- gion on economic growth works. I also �nd that the pro-market attitudes produced by religion are another plausible channel through which the negative in uence of religion works. Finally, the increase in religiosity after the September 11 attacks, ceteris paribus, could plausibly mean that the negative in uence of religiosity in countries with substantial Muslim presence on economic performance would in- crease