Trade and Geographyin the Economic Origins of Islam: Theory and Evidence

This research examines the economic origins of Islam and uncovers two empirical regularities. First,
Muslim countries, virtual countries and ethnic groups, exhibit highly unequal regional agricultural
endowments. Second, Muslim adherence is systematically larger along the pre-Islamic trade routes in
the Old World. The theory argues that this particular type of geography (i) determined the economic
aspects of the religious doctrine upon which Islam was formed, and (ii) shaped its subsequent economic
performance. It suggests that the unequal distribution of land endowments conferred di§erential gains
from trade across regions, fostering predatory behavior from the poorly endowed ones. In such an
environment it was mutually beneÖcial to institute a system of income redistribution. However, a
higher propensity to save by the rich would exacerbate wealth inequality rendering redistribution
unsustainable, leading to the demise of the Islamic unity. Consequently, income inequality had to
remain within limits for Islam to persist. This was instituted via restrictions on physical capital
accumulation. Such rules rendered the investments on public goods, through religious endowments,
increasingly attractive. As a result, capital accumulation remained low and wealth inequality bounded.
Geography and trade shaped the set of economically relevant religious principles of Islam a§ecting its
economic trajectory in the preindustrial world.