This paper uses the 1609 expulsion of 300,000 Muslims from the Iberian peninsula to analyze the mechanisms through which exploitative institutions dampen the de- velopment of pre-industrial economies. The evidence suggests that the persistence of extractive arrangements in formerly Muslim lands stunted the development of the non-agricultural sector long after the expulsion. Arguably exogenous variation in the Christian re-settlers’human capital is then used to investigate the extent to which initial di¤erences in human capital explain the observed divergence in between- institutional outcomes. The results cast doubt on the long-term importance of such di¤erences and stress the role of institutions, at least for the speci…c case of early modern Spain.

This paper investigates how medieval Islam encouraged scienti…c innovation. By granting non-Muslims a degree of religious freedom, Muslim law created competition between religions for converts and social standing. Institutionalized tolerance, coupled with initial disadvantages in the number of adherents and sophistication of theological scholarship, encouraged Muslim religious elites to promote the study of logic. The study of logic for inter-religious debates, in turn, created an environment in which science ‡ourished. Results suggest that competition, tolerance and non-religious intellectual enterprise decreased as the societies under Muslim rule became increasingly religiously homogeneous. The results highlight the role of tolerance in Islam’s medieval development and stress the importance of diversity in constraining elements resistant to innovation.