Exploring the Relationship between Religion, Institutions and Economic Growth – The Case of the post-JCPOA Islamic Republic of Iran

Economic growth is widely recognized as the most telling indicator of economic success. All over the world, the economic performances of governments and companies are evaluated through their ability to ignite and promote economic growth. Therefore, academic fields of research have strived to pinpoint the determining factors of growth, ever since the dawn of economics. In this work, we focus on the respective impact of religion and institutions on economic growth, with an extensive focus on Islam and Islamic institutions. To do so, we split our analysis into two main parts; (1) an extensive literature review of the relationship between religion, institutions and economic growth; and (2) an empirical analysis of the real-life case of the economic development of the post-JCPOA Islamic Republic of Iran. Through an extensive literature review, we were able to draw four main conclusions regarding the relationship between religion, institutions and economic growth; (1) religion, and thus Islam, have not proven to be inimical to economic growth, even though studies fail to testify of religion’s intangible, endogenous impact; (2) institutions can be “good” when they indirectly promote economic growth; (3) more so than the type of political regime and institutions in place, human capital matters for the ignition and promotion of growth; (4) the contemporary questioning around the notion of modernity and its compatibility with Islam is partly traceable to the Westernization of Islamic institutions of the nineteenth century and is further revived with the emergence of Islamic finance. Then, we conducted an empirical study dedicated to the depiction of the current economic environment of post-JCPOA Iran. To do so, we collected qualitative data from specialized documentation, interviews with field experts and field observation, treated the information, displayed it through strategic mapping tools and derived several findings and questions, eventually leading to a confrontation to the theoretical conclusions. To ground our work in reality, we combined our theoretical findings with our problematic and derived five research questions. Although not enabling us to provide any definitive answer to our theoretically-rooted research questions, the empirical part of our work led us to highlight 5 interesting dynamics, deemed crucial to the current and future understanding of post-JCPOA Iran’s economic development. Namely, we found that (1) Islam is omnipresent in Iran and should not be ignored when studying the determinants of the country’s economic development; (2) notwithstanding the nature of the impact on economic growth, Iranian institutions are evolving; (3) the Iranian human capital is special and shows tremendous potential for alleviating several of Iran’s structural challenges; (4) the Iranian form of Islamic finance is isolated but promising; (5) Iran must define its own version of modernity. All in all, while the contemporaneity of our case and the lack of access to reliable data prevented our work from establishing any definitive connection between our theoretical and practical studies, we find the questioning it spurs and the implications it could have for further research to be interesting.