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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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  1. Robert J. Barro & Rachel M. McCleary, 2002. "Religion and Political Economy in an International Panel," NBER Working Papers 8931, National Bureau of Economic Research, Inc.
  2. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
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  12. Evelyn Lehrer & Carmel Chiswick, 1993. "Religion as a determinant of marital stability," Demography, Springer, vol. 30(3), pages 385-404, August.
  13. Schneider, Friedrich G., 2007. "Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 1(9), pages 1-66.
  14. Jeremy Philip Thornton & Sara Helms, 2013. "Afterlife incentives in charitable giving," Applied Economics, Taylor & Francis Journals, vol. 45(19), pages 2779-2791, July.
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  17. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  18. repec:pse:psecon:2005-43 is not listed on IDEAS
  19. Donald Cox & Fredric Raines, 1985. "Interfamily Transfers and Income Redistribution," NBER Chapters, in: Horizontal Equity, Uncertainty, and Economic Well-Being, pages 393-426 National Bureau of Economic Research, Inc.
  20. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
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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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