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Using novel microdata, we document an important, unintended consequence of the Protestant Reformation: a reallocation of resources from religious to secular purposes. To understand this process, we propose a conceptual framework in which the introduction of religious competition shifts political markets where religious authorities provide legitimacy to rulers in exchange for control over resources. Consistent with our framework, religious competition changed the balance of power between secular and religious elites: secular authorities acquired enormous amounts of wealth from monasteries closed during the Reformation, particularly in Protestant regions. This transfer of resources had significant consequences. First, it shifted the allocation of upper-tail human capital. Graduates of Protestant universities increasingly took secular, especially administrative, occupations. Protestant university students increasingly studied secular subjects, especially degrees that prepared students for public sector jobs, rather than church sector specific theology. Second, it affected the sectoral composition of fixed investment. Particularly in Protestant regions, new construction shifted from religious toward secular purposes, especially the building of palaces and administrative buildings, which reflected the increased wealth and power of secular lords. Reallocation was not driven by preexisting economic or cultural differences. Our findings indicate that the Reformation played an important causal role in the secularization of the West. [ABSTRACT FROM AUTHOR]

The printing press was the great innovation in early modern information technology, but economists have found no macroeconomic evidence of its impact. This article exploits city-level data. Between 1500 and 1600, European cities where printing presses were established in the 1400s grew 60% faster than otherwise similar cities. Cities that adopted printing in the 1400s had no prior advantage, and the association between adoption and subsequent growth was not due to printers choosing auspicious locations. These findings are supported by regressions that exploit distance from Mainz, Germany—the birthplace of printing—as an instrument for adoption. [ABSTRACT FROM AUTHOR]