Long-Run Effects of Religious Institution on Development in India

• In Event: Emerging Scholars in Political Economy

Abstract

How do religious institutions affect long-run development? Most studies examining this relationship study its impact on human capital formation. I instead argue that variations in successful development performance persist at the micro-level, namely the village, which can be explained by the legacy of coordination mechanisms anchored by decentralized religious institutions. I theoretically account and empirically test for the long-run effects of one such institution, the Islamic institution of Sufi Khanaqah, which evolved from the 13th century onwards in the Indian subcontinent. I hypothesize that this decentralized religious institution led to long-run development by anchoring market participation, political competition, and public goods provision at the village-level. The legacy of the past millennium’s religious institutions permeates villages today. I provide empirical evidence for the same with an original dataset constructed of Khanaqah locations for all villages of India. The dataset is integrated with census-level data for the years 1991, 2001, and 2011, road upgradation data for 2000-2015, and pooled assembly election results for 1974-2018. Development is indicated by economic activity measured with night-light, health measured by nutritional status, literacy rate, consumption per capita, and poverty rate. Evidence for medieval-era development is indicated by sub-regional revenue statistics from the Mughal gazettes Ain-i Akbari and Dastur al-'amal-i 'Alamgiri for the Khanaqah-led agricultural expansion in 16th-17th century. I estimate a general specification of the model for present-day development outcomes and underlying mechanisms with linear regression without controls. I also control for the potential confounders, as the location of Sufi Khanaqah, although unlikely, could still be potentially nonrandom. For the same reason, I conduct two placebo tests. The first placebo test examines Khanaqahs abandoned due to large-scale involuntary migration from the region of Punjab on the eve of India’s independence and partition in 1947. The second placebo examines a smaller region within Punjab, Malerkotla, which was the only subregion to remain unaffected by the involuntary migration and had its Khanaqahs intact. I find that the presence of Khanaqah is empirically associated with higher long-run development at the village-level. Specifically, 30% more than the mean economic activity. Rs. 14 and 9.7 percentage points more consumption per day and less poverty rate, respectively. 1.2 and 1.3 percentage points less stunting and underweight children, respectively, and 2.7 percentage points more literacy rate.

For the underlying mechanisms, the Khanaqah legacy of anchoring markets positively affects market participation today that is reflected in the higher village-level markets and participation in an economy changing from agrarian to manufacturing. Khanaqah’s competition for resources and waqf grants, which formed the basis for its public goods provision at the agrarian frontiers in the medieval period, is distilled through cultural transmission and institutional life into higher political competition for public goods provision today. I observe 55% more markets, 37% more workers participating in the household manufacturing industry, and 51% more primary schools in the villages with Khanaqah than their respective sample means. I also find more electoral competition in assembly constituencies with Khanaqahs. The winner’s margin of victory decreases in constituencies by 0.5% for every additional Khanaqah in the assembly constituency. The two placebo tests substantiate causality in the hypothesized relationships. Villages with abandoned Khanaqahs have depressed development and mechanisms, while villages where Khanaqahs continued did not. The results are robust to the inclusion of important controls, including pre-13th century cities. These results are further substantiated with observations, interviews, and discussions from fieldwork conducted across eight states of India, focusing on two Khanaqah sites in two states to detail the Khanaqah-associated religious life, economy, stakeholders, and their mutually beneficial relationships.

Rather than human capital, I highlight that religious institutions can affect long-run development through instrumenting market participation, competition, and public goods provision. This alternative mechanism contributes to the development economics literature on what leads to breaking out of the poverty trap. In addition, my findings speak to the literature on Islamic institutions, which squarely rest on the scriptural and legal traditions of religious clergy, based out of the urban-imperial core, and presumed to completely overlay the spatial and temporal landscape of Muslims. These works focus on coded laws, religious scholars cum imperial bureaucrats, and institutions in the urban literate core when the core-periphery differences at the time (and still) are often stark and insulated.

Author

• Taha Rauf, University of Louisville