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.

Religion and inequality: the lasting impact of religious traditions and institutions on welfare state development

“…If religious values trump economic self-interests, the religious poor may form conservative, anti-socialist coalitions with the wealthy, based on the support of traditional social values (Huber et al , 1993; Huber and Stephens, 2001). Second, the religious poor may prefer religious institutions as a source of poor relief, resisting efforts to expand secular, state-run alternatives (Elgin et al , 2013). Finally, the often explicitly anti-clerical rhetoric adopted by socialist parties may have further alienated pious voters by presenting a stark choice between their economic interests and their religious identity (Manow, 2013).…”

Implications of Alternative Banking Systems

“…For instance, Barro and McCleary [2006] look at the relationship between the level of religiosity and economic development and …nds that economic development reduces religious participation and beliefs. Elgin et al [2013] explain why countries with higher levels of religiosity face higher income inequality. They argue that religion motivates individuals to privately and voluntarily engage in charitable giving and these preferences are re ‡ected in a country's policy outcome.…”

Why Do Societies With Higher Average Cognitive Ability Have Lower Income Inequality? The Role of Redistributive Policies

“…Finally, apart from economic and political variables 'societal arrangements [cultural norms, psychological factors], and attitudes that develop over time (and that may or may not be codified in laws [and social norms]) might have powerful effects in determining inequities or the distribution of income that exists across countries' (Tanzi, 1998, p. 5). Thus, some studies have highlighted the importance of ethnic diversity (Menkyna, 2014;Sturm & De Haan, 2015), religion (Elgin et al, 2013) and culture (Mushinski & Pickering, 2000).…”