HUMBOLDT-UNIVERSITÄT ZU BERLIN Faculty of Agriculture and Horticulture “HE SHALL LIFT YOU UP? THE IMPACT OF RELIGIOSITY ON ECONOMIC SUCCESS IN RURAL SOUTH AFRICA. INSIGHTS FROM A FIELD STUDY” Master thesis in Agricultural Economics submitted by Philipp Öhlmann Supervisors: Professor Dr. Silke Hüttel Quantitative Agricultural Economics, Faculty of Agriculture and Horticulture Professor Dr. Wilhelm Gräb Practical Theology, Faculty of Theology Berlin, 13 August 2012 I Contents 1 Introduction...................................................................................................................1 2 Literature Review..........................................................................................................7 2.1 Social Sciences and Theology: The Pentecostal Movement..................................7 2.2 Economics: Quantifying the Impact of Religiosity.............................................10 2.2.1 Macroeconomic Studies...............................................................................10 2.2.2 Microeconomic Studies................................................................................14 2.3 Comparative Discussion......................................................................................18 2.4 Gaps in the Literature...........................................................................................22 3 Theoretical Framework................................................................................................25 3.1 Definition of Religiosity......................................................................................25 3.2 Transmission Mechanisms of Religion to Economic Success.............................26 3.2.1 The Intrinsic Dimension – Max Weber Revisited........................................26 3.2.2 The Social Dimension..................................................................................28 3.2.3 Positive Network Externalities.....................................................................30 3.3 The Determinants of Household Welfare.............................................................31 3.4 Assumptions.........................................................................................................33 3.5 Formal Model.......................................................................................................36 4 Data Set........................................................................................................................43 4.1 Research Methodology........................................................................................43 4.1.1 Motivation of Field Research.......................................................................43 4.1.2 Research area...............................................................................................44 4.1.3 Survey Methodology....................................................................................46 4.1.3.1 Preparatory Study.................................................................................46 4.1.3.2 Main Study...........................................................................................47 4.1.3.3 Income Measurement...........................................................................51 4.1.3.4 Imputation Procedure of Agricultural Production................................53 4.1.4 Religiosity in Fetakgomo.............................................................................61 4.2 Descriptive Statistics............................................................................................67 4.2.1 Demographics, Household Income, and Income Sources............................67 4.2.2 Church Membership Profiles.......................................................................69 5 Model and Results.......................................................................................................73 5.1 Empirical Model Specification............................................................................73 5.2 Log-linear Model.................................................................................................75 5.3 Correction for Selection Bias...............................................................................79 5.4 Multiplicative Dummy Model.............................................................................85 6 Discussion....................................................................................................................87 Literature.........................................................................................................................91 Appendices......................................................................................................................99 II Tables Table 1: Econometric Studies on the Economic Effects of Religiosity...........................17 Table 2: Valuation of Field Crop Production...................................................................56 Table 3: Valuation of Small Fields in the Yard................................................................57 Table 4: Valuation of Vegetable Production....................................................................58 Table 5: Valuation of Fruit Trees.....................................................................................59 Table 6: Valuation of Livestock Production....................................................................60 Table 7: Comparison African Independent Churches – Pentecostal Charismatic Churches............................................................................................................65 Table 8: Churches Encountered in Fetakgomo Municipality..........................................66 Table 9: Income Sources..................................................................................................68 Table 10: Church Membership Profiles...........................................................................70 Table 11: Descriptive Statistics of the Variables used in the Econometric Analysis.......74 Table 12: Estimation Results Log-linear Model..............................................................77 Table 13: Probit Estimates of ZCC membership and African Traditional Religion........83 Table 14: Results Multiplicative Dummy Model............................................................86 III Figures Figure 1: Fields and Hills near the Village of Ga-Nchabeleng........................................44 Figure 2: View of the Area near the Village of Mohlaletsi..............................................45 Figure 3: Group Discussion during the Workshop at Mafise Primary School................46 Figure 4: A Typical Lapa in Fetakgomo..........................................................................48 Figure 5: Interviewing a Household Head and her Daughter..........................................49 Figure 6: Satellite Image of a Village in Fetakgomo.......................................................50 Figure 7: Field Outside a Village.....................................................................................55 Figure 8: Small Field Inside a Household's Yard.............................................................56 Figure 9: Example of a Vegetable Garden.......................................................................58 Figure 10: Fruit Trees in a Household's Yard..................................................................59 Figure 11: Livestock: a Cattle Herd Resting in the Shade of a Tree...............................61 Figure 12: Livestock: a Herd of Goats Crossing the Street.............................................61 Figure 13: Income Distribution among Households in the Data Set...............................67 IV Abbreviations AIC African Independent Church AkIC Akaike Information Criterion BIC Bayesian Information Criterion AME African Methodist Episcopal Church DAFF Department of Agriculture, Forestry and Fisheries EUR Euro (currency) GDP Gross Domestic Product KIDS KwaZulu-Natal Income Dynamics Survey KS-Test Kolmogorov-Smirnov Test OLS Ordinary Least Squares PCC Pentecostal-Charismatic Church RCC Revival Catholic Church StatsSA Statistics South Africa TFP Total Factor Productivity R South African Rand (currency) ZCC Zion Christian Church 1 1 Introduction Why are some people poor and others are rich? Why do some countries grow economically, while others don't? Why are some regions poor, while others are highly developed? Or, put in the context of rural South Africa: Why do some people have big houses and big cars while others have small houses and no car? While these questions on the determinants of economic success and inequality have long been subject of debate in economic literature, various new approaches to explain economic performance have been developed in the past twenty-five years. According to BARRO and MCCLEARY (2003, 760) “one general conclusion is that successful explanations of economic performance must go beyond narrow measures of economic variables to encompass political and social forces.” SELINGER (2004, 524) even asserts that “the absence of the recognition of culture, and more specifically religion, in development theory and strategy” can explain “the failure of development.” In the wake of the broadening view on the causative factors of economic performance, economic research and development organizations such as the World Bank increasingly recognize religion as a factor that impacts on economic outcomes (GUISO, SAPIENZA, and ZINGALES 2003; NOLAND 2005; DE JONG 2011;