Are church and state substitutes? Evidence from the 1996 welfare reform

Abstract

Churches provide community services similar to those provided by the government, but there has been no convincing analysis of the extent to which church activity can substitute for government activity. To address this important issue, this paper uses a new panel data set of Presbyterian Church (USA) congregations to regress both church-member donations and a church's community spending on a number of variables, including government welfare expenditures. A provision of the 1996 welfare law that decreased the availability and use of welfare services by non-citizens serves as an instrument to identify the causal effect of government spending on church activity. The results show that church activities substitute for government activities. Extrapolating the findings to all denominations, the estimated "crowd-out" effect lies between twenty and thirty-eight cents on the dollar. The results are subjected to a number of robustness tests.

Religious identity and the provision of public goods: Evidence from the Indian Princely States

“…3 By the early 20 th century, Muslim religious schools were more prevalent than Hindu religious schools in colonial India. The model therefore predicts that Hindus living in Muslimruled states would have worse educational outcomes because Muslim rulers would spend 2 This insight is consistent with the recent literature suggesting that religious expenditure and public good provision are substitutes (Gill and Lundsgaarde 2004;Hungerman 2005; Hungerman and Gruber 2007), but the mechanism is different; those works suggest that public expenditure crowds out religious expenditure, while our model suggests the reverse. This insight is also consistent with Franck and Rainer (2012), who find that rulers exhibit ethnic favoritism in sub-Saharan Africa, favoritism is an important factor in determining education outcomes, and the presence of favoritism is mitigated when citizens belong primarily to one dominant religion.…”

The Political Economy of Beliefs: Why Fiscal and Social Conservatives/Liberals Come Hand-in-Hand

“…12 Gruber and Hungerman (2007), Hungerman (2005), Gill and Lundsgaarde (2004), and Cnaan et al (2002) document that government welfare crowds out church participation and charitable provision.…”

Do Religious Beliefs Explain Preferences for Income Redistribution? Experimental Evidence

“…Hungerman (2005) and Gruber and Hungerman (2007) find evidence that public insurance spending indeed crowds out religious charitable spending. Akkoyunlu et al (2009) empirically relate the amount of public social expenditure to the strength of religious orientation for the OECD countries.…”