Religion, Income Inequality, and the Size of the Government

Elgin, Ceyhun and Goksel, Turkmen and Gurdal, Mehmet Y and Orman, Cuneyt (2010): Religion, Income Inequality, and the Size of the Government.

Abstract

Recent empirical research has demonstrated that countries with higher levels of religiosity are characterized by greater income inequality. We argue that this is due to the lower level of government services demanded in more religious countries. Religion requires that individuals make financial sacrifices and this leads the religious to prefer making their contributions voluntarily rather than through mandatory means. To the extent that citizen preferences are reflected in policy outcomes, religiosity results in lower taxes, which in turn implies lower levels of spending on both public goods and redistribution. Since measures of income typically do not fully take into account the part of income coming from donations received, this increases measured income inequality. We formalize these ideas in a general equilibrium political economy model and also show that the implications of our model are supported by cross-country data.

• Item Type: MPRA Paper
• Language: English
• Keywords: religion, voluntary donations, taxation, redistribution, income inequality
• Subjects: D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z12 - Religion; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General

References

References [1] Alesina, A., Campante, F.R., and Tabellini G.R., 2008. Why Is Fiscal Policy Often Procyclical?, Journal of the European Economic Association 6(5), 1006-1036.

[2] Andreoni, J., 1989. Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence, The Journal of Political Economy, 97, 1447-1458.

[3] Azzi, C., and R. Ehrenberg, 1975. Household Allocation of Time and Church Attendance, The Journal of Political Economy, 83 (1), 27-56.

[4] Barro, R. J. and R. M. McLeary, 2002. Religion and Economy in an International Panel. NBER Working Paper No. 8931.

[5] Barro, R. J. and R. M. McLeary, 2003a. Religion and Economic Growth across Countries. American Sociological Review, 68 (5), 760-781.

[6] Barro, R. J. and R. M. McLeary, 2003b. International Determinants of Religiosity. NBER Working Paper No. 10147.

[7] Barro, R. J. and R. M. McLeary, 2006. Religion and Economy. Journal of Economic Perspectives, 20, 49-72.

[8] Brooks, A. C., 2003. Religious Faith and Charitable Giving. Policy Review, 39-50.

[9] Brooks, A. C. 2005. “Does Social Capital Make You Generous?” Social Science Quarterly, 86(1): 1-15.

[10] Clark, A., and O. Lelkes, 2004. Deliver Us From Evil: Religion as Insurance. Mimeo, DELTA, Paris.

[11] Cox, D., and F. Raines, 1985. Interfamily Transfers and Income Redistribution, in Horizontal Equity, Uncertainty, and Measures ofWell-Being, Martin David and Timothy Smeeding, eds., University of Chicago Press, Chicago

[12] Gale, W., and J. K. Scholz, 1994. Intergenerational Transfers and the Accumulation of Wealth, Journal of Economic Perspectives 8 (4), 145-160.

[13] Gill, A. and E. Lundsgaarde, 2004. State Welfare Spending and Religiosity: A Cross- National Analysis, Rationality and Society 16 (4), 399-436.

[14] Hall, R.E. and C. I. Jones, 1999. Why Do some Countries Produce so Much More Output Per Worker Than Others? Quarterly Journal of Economics, 114: 83-116.

[15] Huber, J., 2005. Religious Belief, Religious Participation, and Social Policy Attitudes Across Countries. Mimeo, Columbia University.

[16] Iannacone, L. R., 1998. Introduction to the Economics of Religion, Journal of Economic Literature 36, 14651496.

[17] Jaffe, K., 2005. Science, Religion and Economic Development, Interciencia 30, 6: 82-91.

[18] Kessler, D., and A. Masson, 1989. Bequest and Wealth Accumulation: Are Some Pieces of the Puzzle Missing?, Journal of Economic Perspectives 3, 141-152.

[19] LaPorta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 1999. The Quality of Government, Journal of Law, Economics, and Organization, 15: 222-279.

[20] Lederman, D., N. Loayza, and R.R. Soares, 2005. Accountability and Corruption: Political Institutions Matter, Economics and Politics, 17 (3): 1-35.

[21] Lehrer, E.L. and C. Chiswick, 1993. Religion as a Determinant of Marital Stability, Demography 30(3): 385-404.

[22] Lehrer, E.L., 1995. The Effects of Religion on the Labor Supply of Married Women. Social Science Research, 24: 281-301.

[23] Lehrer, E.L., 1996. Religion as a Determinant of Fertility, Journal of Population Economics 9: 173-196.

[24] Lehrer, E.L., 1999. Religion as a Determinant of Educational Attainment: An Economic Perspective. Social Science Research, 28: 358-379.

[25] McCleary, R. M., 2007. Salvation, Damnation, and Economic Incentives. Journal of Contemporary Religion, 22 (1), 49-74.

[26] Meltzer, A., and S. F. Richard, 1981. A Rational Theory of the Size of Government, The Journal of Political Economy, 89 (5), 914-927.

[27] Palani, P., 2008. The Effect of Religiosity on Income Inequality, Journal of Politics and International Affairs, 2008, 61-70.

[28] Rees, T. J., 2009. Is Personal Insecurity a Cause of Cross-National Differences in the Intensity of Religious Belief?, Journal of Religion and Society, 11, 1-17.

[29] Scheve, K., and D. Stasavage, 2006. Religion and Preferences for Social Insurance, Quarterly Journal of Political Science, 1, 255-286.

[30] Schneider, F., 2007. Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries. Economics-The Open-Access, Open-Assessment E-Journal, 1(9): 1-66.

[31] Thornton, J. P. and S. Helms, 2010. Afterlife Incentives in Charitable Giving. Available at SSRN: http://ssrn.com/abstract=1500662

[32] Weber, M., 1956 (1905). The Protestant Ethic andThe Spirit of Capitalism. Unwin, London.