Religious heritage is one of the most commonly cited explanations for cross-country differences in corruption and institutional quality. Protestantism and the cultural values that follow from this religious doctrine have been identified as beneficial for the quality of public institutions. Nevertheless, micro-level experimental studies provide little evidence for religion as such producing the type of norms and values conducive to high quality institutions, like accountability, social trust, and cooperation.

In this paper, authors Bo Rothstein and Rasmus Broms propose an alternate explanation for the observed macro-level positive effect of Protestant legacy and institutional quality, namely the systems for the local financing of religion. By “following the money”, they contrast the medieval parish system in Northwestern Europe, where parish members collectively paid for and administrated religious services as public goods, with the Ottoman Empire, where such goods were normally provided through private endowments from above, and where also tax collection was privatised. Thus, they argue that an early legacy of collective financing and norms of accountability created a path-dependent virtuous circle of state capacity and low corruption, which reverberates to this day.

The historical record does not however need to determine a country’s quality of government. Their findings indicate the importance of designing institutions for self-government of public goods at the local level for improving the quality of government and reducing corruption.