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Religion, income inequality, and the size of the government

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  • Elgin, Ceyhun
  • Goksel, Turkmen
  • Gurdal, Mehmet Y.
  • Orman, Cuneyt

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 motivates individuals to engage in charitable giving and this leads them to prefer making their contributions privately and voluntarily rather than through the state. To the extent that citizen preferences are reflected in policy outcomes, religiosity results in lower levels of taxes and hence lower levels of spending on both public goods and redistribution. Since measures of income typically do not fully take into account private transfers 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.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 30 (2013)
Issue (Month): C ()
Pages: 225-234

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Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:225-234

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Religion; Voluntary donations; Taxation; Redistribution; Income inequality;

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Cited by:
  1. Cagri S. Kumru & Saran Sarntisart, 2013. "Implications of Alternative Banking Systems," ANU Working Papers in Economics and Econometrics 2013-601, Australian National University, College of Business and Economics, School of Economics.

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