Beyond Religion and Culture: The Economic Consequences of the Institutionalization of Sharia Law
45 Pages Posted: 24 Apr 2017 Last revised: 10 May 2019
Date Written: April 30, 2019
Religious and cultural practices have major implications for a Country’s economic performance. However, it is not clear if the institutionalization of these social norms within a country’s legal system causes material economic effects. In this study I show this to be the case. By employing the synthetic control methodology to mitigate endogeneity concerns, I show that the institutionalization of Sharia Law within a Muslim-majority country’s legal system causes material economic costs. Results hold in different settings, confirming that the governmental enforcement of existing social norms constrain individuals’ social and economic freedom, ultimately resulting in worsened economic outcomes.
Keywords: Law and Economics, Islamic Economics and Finance, Synthetic Control Method
JEL Classification: F63, K00, K10, O10, O11, O47, Z10, Z12, Z13, Z18
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