Beyond religion and culture: The economic consequences of the institutionalization of sharia law.

Religious and cultural practices have major implications for a Country's economic performance. However, it is not clear if the formal 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. • The adoption of Sharia Law in Mauritania resulted in material economic costs. • Institutionalizing religious practices causes lasting economic effects. • Formalizing social norms results in worsened economic outcomes. [ABSTRACT FROM AUTHOR]