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Pay or Pray? The Impact of Charitable Subsidies on Religious Attendance

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  • Jonathan Gruber

Abstract

The economic argument for subsidizing charitable giving relies on the positive externalities of charitable activities, particularly from the religious institutions that are the largest recipients of giving. But the net external effects of subsidies to religious giving will also depend on a potentially important indirect effect as well: impacts on religious participation. Religious participation can be either a complement to, or a substitute with, the level of charitable giving. Understanding these spillover effects of charitable giving may be quite important, given the existing observational literature that suggests that religiosity is a major determinant of well-being among Americans. In this paper I investigate the impact of charitable subsidies on a measure of religious participation, attendance at religious services. I do so by using data over three decades from the General Social Survey, as well as confirming the impact of such subsidies on religious giving using the Consumer Expenditure Survey. I find strong evidence that religious giving and religious attendance are substitutes: larger subsidies to charitable giving lead to more religious giving, but less religious attendance, with an implied elasticity of attendance with respect to religious giving of -0.92. These results have important implications for the debate over charitable subsidies. They also serve to validate economic models of religious participation.

Suggested Citation

  • Jonathan Gruber, 2004. "Pay or Pray? The Impact of Charitable Subsidies on Religious Attendance," NBER Working Papers 10374, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10374
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    1. Barrett, Kevin S. & McGuirk, Anya M. & Steinberg, Richard S., 1997. "Further Evidence on the Dynamic Impact of Taxes on Charitable Giving," National Tax Journal, National Tax Association;National Tax Journal, vol. 50(2), pages 321-334, June.
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    4. Randolph, William C, 1995. "Dynamic Income, Progressive Taxes, and the Timing of Charitable Contributions," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 709-738, August.
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    6. Clotfelter, Charles T., 1985. "Federal Tax Policy and Charitable Giving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226110486.
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    Cited by:

    1. Andreoni, James & Payne, A. Abigail, 2011. "Is crowding out due entirely to fundraising? Evidence from a panel of charities," Journal of Public Economics, Elsevier, vol. 95(5), pages 334-343.
    2. Yörük, Barış K., 2014. "Does giving to charity lead to better health? Evidence from tax subsidies for charitable giving," Journal of Economic Psychology, Elsevier, vol. 45(C), pages 71-83.
    3. Sriya Iyer, 2016. "The New Economics of Religion," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 395-441, June.
    4. Hungerman, Daniel M., 2005. "Are church and state substitutes? Evidence from the 1996 welfare reform," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2245-2267, December.
    5. Helms, Sara E. & Thornton, Jeremy P., 2012. "The influence of religiosity on charitable behavior: A COPPS investigation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(4), pages 373-383.
    6. Duquette, Nicolas J., 2016. "Do tax incentives affect charitable contributions? Evidence from public charities' reported revenues," Journal of Public Economics, Elsevier, vol. 137(C), pages 51-69.
    7. Michael W. Walrath, 2016. "Entry Models Applied to Churches: Could Protestants use a Catholic Bishop to Solve Excess Entry?," Journal of Industrial Economics, Wiley Blackwell, vol. 64(3), pages 557-588, September.
    8. Tan, Jonathan H.W., 2006. "Religion and social preferences: An experimental study," Economics Letters, Elsevier, vol. 90(1), pages 60-67, January.
    9. Chau Do & Irina Paley, 2012. "Altruism from the house: the impact of home equity on charitable giving," Review of Economics of the Household, Springer, vol. 10(3), pages 375-393, September.
    10. Daniel M. Hungerman, 2011. "Substitution and Stigma: Evidence on Religious Competition from the Catholic Sex-Abuse Scandal," NBER Working Papers 17589, National Bureau of Economic Research, Inc.
    11. Holmes, Jessica, 2009. "Prestige, charitable deductions and other determinants of alumni giving: Evidence from a highly selective liberal arts college," Economics of Education Review, Elsevier, vol. 28(1), pages 18-28, February.
    12. Yörük Bariş K., 2015. "Do Charitable Subsidies Crowd Out Political Giving? The Missing Link between Charitable and Political Contributions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 1-29, January.
    13. Jay C. Hartzell & Christopher A. Parsons & David L. Yermack, 2010. "Is a Higher Calling Enough? Incentive Compensation in the Church," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 509-539, July.
    14. Susan Dynarski & Jonathan Gruber & Danielle Li, 2009. "Cheaper By the Dozen: Using Sibling Discounts at Catholic Schools to Estimate the Price Elasticity of Private School Attendance," NBER Working Papers 15461, National Bureau of Economic Research, Inc.
    15. Teemu Lyytikäinen & Torsten Santavirta, 2013. "The effect of church tax on church membership," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1175-1193, July.
    16. Backus, Peter, 2010. "Is charity a homogeneous good?," The Warwick Economics Research Paper Series (TWERPS) 951, University of Warwick, Department of Economics.
    17. Dehejia, Rajeev & DeLeire, Thomas & Luttmer, Erzo F.P., 2007. "Insuring consumption and happiness through religious organizations," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 259-279, February.
    18. Jonathan Gruber, 2005. "Religious Market Structure, Religious Participation, and Outcomes: Is Religion Good for You?," NBER Working Papers 11377, National Bureau of Economic Research, Inc.
    19. Eswaran Mukesh, 2011. "Competition and Performance in the Marketplace for Religion: A Theoretical Perspective," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-36, March.
    20. Akay, Alpaslan & Karabulut, Gökhan & Martinsson, Peter, 2015. "Cooperation and punishment: The effect of religiosity and religious festival," Economics Letters, Elsevier, vol. 130(C), pages 43-46.
    21. Barış K. Yörük, 2013. "The Impact of Charitable Subsidies on Religious Giving and Attendance: Evidence from Panel Data," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1708-1721, December.
    22. James Andreoni & Abigail Payne, 2007. "Crowding out Both Sides of the Philanthropy Market: Evidence from a Panel of Charities," Levine's Bibliography 122247000000001769, UCLA Department of Economics.
    23. S. Brock Blomberg & Thomas DeLeire & Gregory D. Hess, 2006. "The (After) Life-Cycle Theory of Religious Contributions," CESifo Working Paper Series 1854, CESifo Group Munich.
    24. Richard P.C. Brown & Gareth Leeves & Nichola Kitson & Prabha Prayaga, 2015. "Give and Take or Give and Give: Charitable Giving in Migrant Households," Discussion Papers Series 547, School of Economics, University of Queensland, Australia.
    25. Brown, Timothy Tyler, 2009. "Rational praying: The economics of prayer," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(1), pages 37-44, January.

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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