The Paradise Premium: How the Afterlife affects Economics

“Don't let your dunya be your akhira”, Aisha (a London accountant) warned her daughter. This means “Don’t sacrifice eternal rewards for temporary material gains”. I hear the same in Marrakech and Mumbai, but many economists still misunderstand. They continue to assume that agents are maximising utility on earth.

Today, let's explore how fear of eternal damnation has shaped economic decisions and gender relations throughout world history. I also present a new theoretical model: the ‘paradise premium’, which quantifies how believers sacrifice economic gains for spiritual rewards.

From Divine to Earthly: Secularisation

During the early modern period (1520-1700), regions with both Catholic and Protestant populations (particularly Germany and Switzerland) witnessed intense religious competition centered on supernatural protection. This manifested dramatically in witch trials, where religious authorities prosecuted thousands for alleged pacts with the devil.

By identifying and punishing supposed servants of Satan, churches demonstrated their power to shield communities from supernatural evil and protect believers’ eternal salvation.

In subsequent centuries, Europe underwent the Secular Enlightenment, which marked a profound shift in elite priorities away from supernatural concerns toward rational inquiry and material progress.

Almelhem et al’s (2023) textual analysis of 173,031 English works reveals that from the 17th century, scientific volumes increasingly came to focus on material progress over spiritual rewards. This shift in temporal discount rates preceded (and potentially laid the foundations for) the Industrial Revolution.

Japan belatedly followed suit. When confronted with Western military superiority in the 1850s, Southwestern Daimyos recognised the ineffectiveness of the Tokyo shogunate. Rather than suffer colonisation, they staged the Meiji Restoration and strategically adopted Western technologies and institutions to advance rapid modernisation. Anti-Buddhist policies (haibutsu kishaku) were implemented - partly because it was seen as ‘backward’.

Secularising reforms were also embraced across the Islamic world. From Turkey’s top-down Tanzimat reforms to Egypt’s post-colonial modernisation under Nasser, government sought to catch up and curtail religious influence. Yet this project faced significant resistance and ultimately gave way to the “Global Islamic Revival” - switching the focus back to piety and paradise.

Almelhem et al 2023

Prioritising the Afterlife

A British Muslim friend kindly gifted me US-based Omar Suleiman’s book on “Jannah”. A popular choice! - Amazon UK’s second most gifted book in the religious history of Islam.

Echoing scholarly consensus, he underscores the importance of observing the holy month of Ramadan, with no food or water from dusk till dawn, so as to accumulate blessings and please Allah. The period shifts approximately 11 days earlier each year, with fasting periods varying dramatically by latitude and season - from 12 to 18+ hours daily.

This cyclical variation is an Economist’s delight: the perfect natural experiment to measure how believers sacrifice material well-being for spiritual rewards. So let’s run through the literature…

Bertoli and Grembi (2024) find that during Ramadan, Muslim workers in Spain were less likely to suffer from workplace accidents - not due to increased safety but reduced labour supply. During this holy month, Muslim workers signed 14% fewer employment contracts. Those who worked made deliberate adjustments (changing shifts) to compensate for fasting-induced physical distress.

Pregnant women are permitted to postpone their fast, yet many prioritise piety. A 2010 study in Bradford, UK - when Ramadan fell in August with fasts lasting 18 hours- revealed that over 43% of sampled Muslim pregnant women chose to fast.

Pradella, Witte and van Ewijk’s (2023) systematic review suggests that Ramadan fasting during pregnancy potentially creates long-term health issues for children. This includes increased child mortality, stunting, poorer cognitive performance, hearing impairments, and worse adult health outcomes. (Caveat: many of the underlying studies are small and rely on self-reported fasting).

Filipe Campante and David Yanagizawa-Drott (2015) studied the psychological and economic impacts of the duration of fasting. Since the fast lasts as long as daylight, its length depends on whether it falls in the summer or winter months. Muslims who experience longer fasting hours report higher subjective well-being. This is a great example of how spirituality can increase happiness. However, longer Ramadan fasting requirements also have a measurable negative effect on economic growth in Muslim-majority countries. When fasting hours increase (due to Ramadan falling in summer months at higher latitudes), GDP growth decreases.

Filipe Campante and David Yanagizawa-Drott 2024

Afterlife Beliefs: East Asia & South Asia's Divergence

Spiritual obligations vary across cultures, and as I’ve found through my globally comparative research, this significantly impacts gender relations.

Back in 1900, both East Asia and South Asia were extremely patriarchal, but with several important cultural distinctions. East Asian spirituality typically meant men honoured their ancestors by gaining prestigious positions, like becoming a civil servant in the imperial bureaucracy, and performing key rituals. Given the prestige of upward mobility, families readily seized new economic opportunities, sending their daughters to work in urban factories.

East Asian culture continues to glorify economic prosperity and academic excellence. When I visited Hong Kong for Lunar New Year, festival imagery celebrated ‘luck and money’. Last night one of my Chinese students gifted me a fridge magnet, it says “first place” - referring to the extremely respected person who topped the national imperial examinations and met the Emperor. That was the highest honour, which would make your family very proud.

South Asia differed - trusted networks of cooperation were consolidated through endogamous marriage (within extended kin) and male honour depended on female seclusion. Islamic scholars have always urged gender segregation, modesty and veiling. Female labor supply was thus less responsive to economic opportunities, and remains low. This is part of what I call the “Honour-Income Trade-Off” - where earnings were sacrificed in order to gain status, social inclusion and blessings.

Now, in the 21st century, we see a persistent driver of cultural divergence. South Asians remain much more religious, with 90-94% of Pakistanis and Bangladeshis saying religion is ‘very important’. Moreover, religion is primarily understood as concern for ‘life after death’.

If families are extremely concerned for the afterlife (akhira) and believe this is contingent on female seclusion, female labor supply may be less responsive to economic opportunities.

“Our time on earth is temporary, just a drop in the ocean, this is just an examination centre. What really matters is the afterlife” - explained Hussein, as we chatted at his home in Mumbai’s Dharavi.

During COVID, Hussein’s friend Abdul became greatly indebted and permitted his wife to work. Having recently returned from working in Saudi, Hussein believed this could cause fitna (moral corruption). He successfully persuaded Abdul to recognise that earthly sufferings only last a few decades, while the afterlife is eternal. He shouldn’t let his dunya be his akhira. By intervening, Hussein fulfilled his religious obligations to “Command Right and Forbid Wrong”.

Exactly the same calls can be heard across Muslim communities worldwide. To quote Omar Suleiman,

“This worldly life is nothing more than a test, and if a person lives a life strictly defined by the values of monotheism and acceptance of the Final Prophet, they will be welcomed into the permanent abode of bliss: Jannah… Allah will handsomely reward them for every virtuous act or supplication they make to Him”.

Indeed, the British Muslims I’ve interviewed speak of Hell with the same certainty as tomorrow’s sunrise. When entire communities make costly sacrifices for the afterlife, it reinforces widespread assumptions that it’s obviously true.

The Paradise Premium

Given the wealth of empirical literature on how concern for the afterlife really affects economic activity, I suggest we update our models of the world to capture these utility functions.

Below, my basic model illustrates what I call “the Paradise Premium”, how much utility one gets from piety, even if this means foregoing earnings. Here, a person’s “utility function” is determined by both earnings, piety and perceived chance of paradise.

Imagine four women whose religion upholds that men should be breadwinners, while women prioritise care-giving and avoid mixing with unrelated men. In this context, a woman’s earnings often involve utility costs - jeopardising both male honour and their perceived likelihood of reaching paradise. Market work thus carries a ‘religious penalty’.

• A represents housewives with no market earnings but high spiritual utility. She will be amply rewarded in the afterlife.

• B depicts factory or market work - rife with ‘fitna’ (moral corruption). Given fears of eternal damnation, these jobs will be mostly male. Indeed, when I met Hussein at a Muslim market in Mumbai, all the other traders were men.

• C represents teaching, nursing, or public sector jobs - predominantly female and well-regulated workplaces. These positions offer reasonable earnings while minimising spiritual risk.

• D connotes commercial careers with extensive male networking, travel and late meetings often involving alcohol. High earnings, but great spiritual risk.

My crude model may help explain why only 37% of British Muslim women are economically active. Their choices are not ‘irrational’, families are optimising across eternity.

Micro-economists will probably complain, saying this graph isn’t kosher, as it breaks a few rules! But I hope it conveys that when one cares about the afterlife, material sacrifices are worthwhile.