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.

An inverse hyperbolic sine heteroskedastic latent class panel tobit model: An application to modelling charitable donations

“…3 However, a fundamental problem with the tobit approach, relating to the treatment of the censored observations, lies in the possibility that the decision to donate and the decision regarding how much to donate, 1 It should be acknowledged that the implications of charitable behaviour have also been analysed at the country level. For example, Elgin et al (2013) analyse how religion motivates individuals to engage in charitable giving and this leads them to prefer making their contributions privately and voluntarily rather than through the state, with religiosity resulting in lower levels of taxes and hence lower levels of spending on both public goods and redistribution. 2 The tobit approach has been used in a very wide range of applications characterised by truncated observations: for recent examples, see Addessi et al (2014) in the context of innovation activity, AlMalkawi et al (2014) in the context of dividend smoothing and Chen et al (2014), who analyse the intellectual capital and productivity of insurers.…”

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).…”