Why Religion Might Persist in a Globalized Market Economy: An Economic Modeling Approach

In contrast to the sociological secularization hypothesis, there is not much disputed evidence that religion stubbornly refused to disappear. In fact, although organized (Christian) religion continues to decline in the Western part of the world there is a religious revival in Africa, Asia, and Latin America. Focusing on Europe and Northern America from an economist’s point of view one is tempted to ask whether Christianity might persist in the long-run of a globalized market economy. The present chapter provides a specific answer to this broad question by using a dynamic economic modeling approach, e.g., an overlapping generations’ (OLG) model of the global market economy wherein economic development (rise in per capita income) is driven by physical and human capital accumulation. Religion is part of social capital and affects children’s educational attainment positively as substantial empirical evidence shows (e.g., Ewing 2000). Based on this and other empirical observations, Fan (2008) constructed an overlapping generations’ model of a closed economy in which an individual’s religious participation is due to the concern for her children’s human capital formation as well as her religious beliefs. However, the present stage of economic globalization is better represented by a multi-country, open-economy model with internationally mobile capital than by a closed-economy model. Thus, we extend Fan’s (2008) invaluable closed economy towards a two-country open-economy OLG model a la Michel and Vidal (2000) with country-specific human capital accumulation and religious participation. In this model framework, it will be shown why religion might be thriving in developing Africa, Asia, and Latin America and be an everlasting social phenomenon even in the economically advanced West in spite of the decline in Western religious participation (as measured by church attendance).