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New CAS Research Focus

Natural experiments in history

Munich, 11/12/2013

Why do Protestants earn more and boys do better in science? LMU professors Ludger Wößmann and Davide Cantoni use historical data to elucidate economic and social developments. Here they discuss the explanatory power of economic history.

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In your new book, entitled “Endangering Prosperity”, you use levels of proficiency in high-school mathematics to predict the future course of economic development. Can you explain how this is done?

Wößmann: We have looked at how well students in various countries around the world have done in the international achievement tests, which have been carried out regularly since the 1960s. We then compared the quality of education, as reflected in these tests, with the long-term course of economic development – specifically with the rate of growth in per capita GDP (Gross Domestic Product) – in these countries. It turns out that the countries that are most successful economically over the long term are those with very well educated populations. Indeed, it is astonishing how closely these two variables are correlated. Education alone is sufficient to explain most of the difference in growth rates between these countries over the past 50 years. This underlines the overriding role of the educational level of a country’s inhabitants for its long-term economic productivity and general prosperity.

In the first PISA test carried out in 2000, Germany’s showing was below average relative to its international competitors …

Wößmann: Germany fits this picture perfectly. In that PISA test, German students made a rather mediocre showing and, in the long-term perspective, our economic performance since then has been “fair to middling”. German students took part in the very early international assessments in the mid-1960s, and the results then were already very mediocre. In science subjects, we were already among the stragglers at that stage. As a consequence, for 25 years Germany did not participate in such tests. Today, there are at least debates about what needs to be done.

When you compare school performance records, you make use of data that are several decades old. Is this period representative of the long-term links from which economic historians derive their insights?

Wößmann (laughs): A few decades is equivalent to no more than the blink of an eye, when viewed in the light of the lengths of time considered in the Research Focus on “Mechanisms for Persistence in Economic History” at LMU’s Center for Advanced Studies, which Davide Cantoni and I have jointly designed.

Cantoni: Modern research in economic history shows that many current trends cannot be accounted for simply on the basis of the events of the past few years. There are studies that go back centuries or even millennia in order to explain why present-day societies are structured as they are. The goal is always the same – to identify the major factors that have determined the nature of certain social and economic phenomena which we can observe today, and to understand why these structures have persisted, although the conditions that gave rise to them have long since changed.

To quantify the effects of historical circumstances, we make use of the experiments that history has carried out for us. We look for an event in the past that led to the differentiation of a society into identifiably distinct groups – Protestants and Catholics, for instance. This differentiation represents a kind of natural experiment, which helps us to isolate particular factors whose possible effects on social phenomena can then be investigated empirically.

In one of your studies of the connection between religious beliefs and economic success, you start with Martin Luther and end by refuting Max Weber’s famous thesis.

Wößmann: Recent studies show that Protestants in Germany earn more, on average, than Catholics do. This difference can be explained entirely by the fact that Protestants in Germany are generally better educated. In contrast to Max Weber, who argued that Protestants are more successful than Catholics because they have absorbed a very specific work ethic, we tested the hypothesis that their relative economic advantage might have more to do with a higher level of education. In his sermons and writings, Luther repeatedly calls on the nobility to establish schools and insists that parents should send their children to school, so that everyone can learn to read the Bible. An unintended consequence of his success in this respect was that Protestants, on the whole, tended to be better educated than their Catholic counterparts. This paid off economically during the era of industrialization, at the latest, because an above-average education proved to be a crucial advantage in that environment.

Of course, the individuals who converted to Protestantism were not a random sample of the population. We used geographical distance from Wittenberg as the principal variable to perform an historical experiment. People who lived nearer to Wittenberg, the cradle of the Reformation, were in fact more likely to adopt the new creed. We were also able to show that these persons were more likely to be better educated, and that this effect probably accounts for all of the difference in economic success between Protestants and Catholics.

We can detect such correlations and identify causal connections only because modern information technology allows us to process and analyze data in amounts that would have been impossible to handle only 30 years ago, and that Max Weber never dreamed of. That opens many new opportunities for empirical research on historical data.

Apart from education and religion, what other long-acting influences can you cite that economic historians have already empirically identified?

Cantoni: Modern gender roles also have very deep roots in history. For example, the economist Paola Giuliano and her colleague Nathan Nunn at Harvard University have analyzed an ethnographic atlas of the Soviet Union, which contains very detailed information on the living conditions in various pre-industrial societies. They were able to show that the introduction of the plow in early agricultural societies led to the differentiation of distinct social roles for men and women. Work in the fields became a task for men, because they were stronger and better able to manage the new implement. Giuliano and Nunn then compared these data with the results of modern surveys of attitudes to the role of women in society around the world, and concluded that this distinction in role models persists. Societies that are descended from those which introduced the plow way back then are less receptive to the idea of social and economic equality between the sexes, although the whole context has, of course, changed radically – the majority of the population today no longer depends on the plow for their livelihood.

Wößmann: In the case of international student assessments, one can also find evidence of the persistence of long-practiced gender roles. In natural sciences, boys do better on average than girls. Global comparisons, however, reveal that the magnitude of this difference in performance is directly correlated with the degree of inequality between the sexes in the societies in which they live.

As part of your Research Focus at CAS, you have organized a conference on “The Long Shadow of History”. Which of the many shadows cast by history do you intend to illuminate?

Wößmann: Many new and exciting studies will be presented – on the relationship between colonialism and economic development, for instance. This example demonstrates the paramount importance of institutions for the durability of long-term initiatives. Thus, the differences in economic prosperity between former colonies are in large part determined by whether the colonists introduced an exploitative or a productive economic system. The establishment of secure property rights was apparently an important factor in determining how productive these economies are today.

But the significance of institutional frameworks extends well beyond their role in economic development. For example, in present-day Eastern Europe, the degree of confidence that people have in the police and the courts, and the incidence of corruption in public life, vary depending on whether or not the country in question was part of the Habsburg Empire. Within Eastern European countries that were divided by the now non-existent borders of the Habsburg Empire, one finds that, even today, the people living in areas that were then on the Habsburg side of the border tend to have more trust in their local public institutions, although these countries have gone through the same historical experiences over the past 100 years. This example demonstrates how institutions and cultural factors interact with each other and give rise to persistent relationships and patterns. These two factors, which we refer to as mechanisms, together with geography and education/technology, and the interrelationships between them are crucial in mediating historical persistence – but also in breaking it.

Interview: nh

Prof. Davide Cantoni, Ph.D., and Prof. Dr. Ludger Wößmann are Joint Speakers for the Research Focus on “Mechanisms of Persistence in Economics and the Social Sciences” at LMU’s Center for Advanced Studies. Prof. Ludger Wößmann was appointed to the Chair of Economics at LMU in 2006 and is Director of the Ifo Center for the Economics of Education and Innovation at the Ifo Institute in Munich. Prof. Davide Cantoni holds a professorship at the Institute of Economic History at LMU and is also a member of the CESifo Research Network at the Ifo Institute.

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