Not Just Another Recession
Why the Global Economy May Never Be the Same
Every year millions of Muslims in every region of the world fast from sunrise to sundown for the holy month of Ramadan. To accommodate this practice, businesses in many Muslim countries grant their employees reduced working hours. In the United Arab Emirates, for example, the work day is shortened by two hours, by law, and in 2012, the Minister of Labor imposed a country-wide ban on outdoor work between noon and three o'clock in order to protect fasting laborers from increased susceptibility to heat stress. To understand how Ramadan affects the economy, Public Policy Professors Filipe Campante and David Yanagizawa-Drott at the Harvard Kennedy School examined over six decades of data.
In their paper, Campante and Yanagizawa-Drott establish that Ramadan has a negative economic impact. To determine cause and effect, rather than mere correlation, they exploit a unique variation in how Ramadan is practiced worldwide: Because the number of daylight or fasting hours changes every year depending on the country's latitude and when Ramadan occurs (it is basedon on the fluctuating, lunar-based Islamic calendar), this allowed the scholars to examine the economic impact of fasting times while keeping all other factors, such as geography, constant. For example, Turkey, which lies further from the equator than Indonesia, will experience a more dramatic range of fasting times. When Ramadan falls in summer, Turkish Muslims may fast for up to 15 hours per day. But a winter Ramadan in Turkey is less demanding since daylight lasts for only 9 hours on average. Indonesia, on the other hand, which passes through the equator, receives a steady 12 hours of average daylight regardless of the season. As Campante and Yanagizawa-Drott predicted, northern countries, like Turkey, experienced a greater drop in economic output during long summer fasts than equatorial ones like Indonesia. They write:
We show that longer prescribed Ramadan fasting has a robust negative effect on output growth in Muslim countries, whether measured by GDP per worker, GPD per capita, or total GPD, and whether measured in yearly rates or aggregated up to five-year periods. Most reassuringly, we find no effect whatsoever on GDP growth in non-Muslim countries.
In fact, they found that a one hour increase in fasting led to a decrease of 0.7 of a percentage point in economic growth.
Because such a tiny economic dip would be difficult to see in a graph, this visualization takes a different approach. Using data from 29 countries provided by Campante and Yanagizawa-Drott, it compares the actual fasting hours and GDP per worker growth with predicted growth based on two hypothetical scenarios: a longer fast in a June Ramadan (1984) and a shorter one in a January Ramadan (1997). Countries further away from the equator show greater deviations between the predicted and actual GDP outcomes because a shorter fast would lead to more growth and a longer fast would lead to less growth. These are the very countries where, according to Campante and Yanagizawa-Drott, Ramadan has more of an economic impact.
Campante and Yanagizawa-Drott note that Ramadan has a positive influence on well being, according to their analysis of World Values Survey data. "Put simply," they write, "it makes [Muslims] happier in spite of making them relatively poorer."