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The effect of church tax on church membership

  • Teemu Lyytikäinen
  • Torsten Santavirta

Abstract In this study we examine the effect of church tax on the church membership decision using Finnish data. We present both descriptive statistics from an opting-out website and econometric evidence exploiting the panel structure of a large individual-level data set. Our descriptive analysis shows that opting-out is concentrated towards the last days of the year, i.e., the last chance to avoid paying church tax for the entire coming year. Our econometric evidence suggests however, that the average effect of tax incentives in the whole population is very small in magnitude, while being statistically significant. The price elasticity of church membership is roughly -0.01. In addition, we find that church membership dropped substantially when a law change made opting-out significantly easier. This finding suggests that transaction costs play an important role in the membership decision.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 20.

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Date of creation: 30 Dec 2010
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Handle: RePEc:fer:wpaper:20
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  1. Gruber, Jonathan, 2004. "Pay or pray? The impact of charitable subsidies on religious attendance," Journal of Public Economics, Elsevier, vol. 88(12), pages 2635-2655, December.
  2. Dehejia, Rajeev & DeLeire, Thomas & Luttmer, Erzo F. P., 2005. "Insuring Consumption and Happiness through Religious Organizations," Working Paper Series rwp05-047, Harvard University, John F. Kennedy School of Government.
  3. Laurence R. Iannaccone, 1998. "Corrigenda [Introduction to the Economics of Religion]," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1941-1941, December.
  4. Brigitte C. Madrian & Dennis F. Shea, 2000. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," NBER Working Papers 7682, National Bureau of Economic Research, Inc.
  5. Ronen Bar-El & Teresa García-Muñoz & Shoshana Neuman & Yossef Tobol, 2010. "The Evolution of Secularization: Cultural Transmission, Religion and Fertility Theory, Simulations and Evidence," Working Papers 2010-10, Bar-Ilan University, Department of Economics.
  6. Laurence R. Iannaccone, 1998. "Introduction to the Economics of Religion," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1465-1495, September.
  7. Jonathan Gruber, 2004. "Pay or Pray? The Impact of Charitable Subsidies on Religious Attendance," NBER Working Papers 10374, National Bureau of Economic Research, Inc.
  8. Gruber, Jonathan & Hungerman, Daniel M., 2007. "Faith-based charity and crowd-out during the great depression," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1043-1069, June.
  9. Jonathan Gruber & Daniel M. Hungerman, 2008. "The Church versus the Mall: What Happens When Religion Faces Increased Secular Competition?," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 831-862, 05.
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