Trade, Institutions and Religious Tolerance: Evidence from India
Stanford Graduate School of Business
January 10, 2008
Stanford University Graduate School of Business Research Paper No. 2004
This paper analyses the incentives that shaped Hindu and Muslim interaction in India's towns from the rise of Islam to the rise of European intervention in the 17th century; it argues that differences in the degree to which medieval Hindus and Muslims could provide complementary, non-replicable services and a mechanism to share the gains from exchange has resulted in a sustained legacy of religious tolerance. Due to Muslim-specific advantages in Indian Ocean shipping, incentives to trade across ethnic lines were strongest in medieval trading ports, leading to the development of institutional mechanisms that further supported inter-religious exchange.
Using new town-level data spanning India's medieval and colonial history, this paper finds that medieval trading ports were 25 percent less likely to experience a religious riot between 1850-1950, two centuries after Europeans disrupted Muslim dominance in overseas shipping. Medieval trading ports continued to exhibit less widespread religious violence during the Gujarat riots in 2002. The paper shows that these differences are not the result of variation in geography, political histories, wealth, religious composition or of medieval port selection, and interprets these differences as being transmitted via the persistence of institutions that emerged to support inter-religious medieval trade. The paper further characterises these institutions and the lessons they yield for reducing contemporary ethnic conflict.
A newer version, entitled "Trade, Institutions and Ethnic Tolerance", http://ssrn.com/abstract=2155918 was accepted at the American Political Science Review.
Number of Pages in PDF File: 46
Keywords: Trade, Institutions, Complementarities, Religion, Ethnic Conflict, Peace
JEL Classification: F10, N25, O17, Z12working papers series
Date posted: October 19, 2008 ; Last revised: October 1, 2013
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