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Religion, Income Inequality, and the Size of the Government

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

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

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1208.

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Date of creation: 2012
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Handle: RePEc:tcb:wpaper:1208

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Keywords: religion; voluntary donations; taxation; redistribution; income inequality;

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  1. William G. Gale & John Karl Scholz, 1994. "Intergenerational Transfers and the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 145-160, Fall.
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  18. Kessler, Denis & Masson, Andre, 1989. "Bequest and Wealth Accumulation: Are Some Pieces of the Puzzle Missing?," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 141-52, Summer.
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  22. repec:pse:psecon:2005-43 is not listed on IDEAS
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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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