INEQUALITY, RELIGION, AND PRODUCTIVITY: HETEROGENEOUS PANEL EVIDENCE

The research focuses on the link between income inequality (Gini) and secularization (non-religion) and labor productivity, using a balanced panel of 119 countries over 1970–2005. Two-way fixed effects, long differences, and income group interactions are estimated with country-clustered errors. Investment is robustly associated with higher productivity across specifications. In pooled panels, coefficients on the Gini and non-religion are small and imprecise. Allowing for heterogeneity reveals sharper patterns – higher inequality is associated with slower productivity growth within upper-middle income economies, while secularization is negatively related to growth in low and high income groups and modestly positive in upper-middle income countries. These patterns are interpreted as consistent with religion functioning as an informal institution where state capacity is limited, and with demographic headwinds in advanced economies.