Religious Festivals, Economic Development, and Social Capital: Evidence from Catholic Saint-day Celebrations in Mexico

Abstract: Religious festivals are widespread and persistent features of social life worldwide. Even in poorer societies, households and communities spend nontrivial shares of their income on festivals. What are the economic and social consequences of religious festivals? We study Catholic saint-day festivals in Mexico, exploiting two features of the setting: (i) festival dates vary across the calendar and were determined in the early history of towns during conquest, and (ii) there is considerable variation in the intra-annual timing of the main agricultural seasons. We compare municipalities where festivals overlap with planting or harvest to municipalities where they do not overlap to examine the impacts of festivals on long-run economic development and social outcomes. We find that having festivals during the planting season is associated with worse development outcomes, but higher social capital and lower income inequality. A likely mechanism is that festival spending reduces agricultural investment in the planting season by liquidity-constrained households. At the same time, redistribution via festival-related consumption may be especially valued during the planting season when food stores are low, leading to higher social capital. This suggests that festivals in liquidity-constrained times have social capital benefits, helping explain their persistence despite their economic consequences.