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Religion, Income Inequality, and the Size of the Government

Author

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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.

Suggested Citation

  • Ceyhun Elgin & Turkmen Goksel & Mehmet Y. Gurdal & Cuneyt Orman, 2012. "Religion, Income Inequality, and the Size of the Government," Working Papers 1208, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:1208
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    Cited by:

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    2. Brown, Sarah & Greene, William H. & Harris, Mark N. & Taylor, Karl, 2015. "An inverse hyperbolic sine heteroskedastic latent class panel tobit model: An application to modelling charitable donations," Economic Modelling, Elsevier, vol. 50(C), pages 228-236.
    3. 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.
    4. Coccia, Mario, 2014. "Socio-cultural origins of the patterns of technological innovation: What is the likely interaction among religious culture, religious plurality and innovation? Towards a theory of socio-cultural drive," Technology in Society, Elsevier, vol. 36(C), pages 13-25.
    5. Lous, Bjorn, 2020. "On free markets, income inequality, happiness and trust," Other publications TiSEM e2480eed-722b-4e2a-8e29-4, Tilburg University, School of Economics and Management.
    6. Grigoriadis, Theocharis, 2017. "Religion, administration & public goods: Experimental evidence from Russia," Economic Modelling, Elsevier, vol. 66(C), pages 42-60.
    7. Joan-Maria Esteban & Gilat Levy & Laura Mayoral, 2018. "Liberté, Égalité... Religiosité," Working Papers 1030, Barcelona Graduate School of Economics.
    8. Kirchmaier, Isadora & Prüfer, Jens & Trautmann, Stefan T., 2018. "Religion, moral attitudes and economic behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 148(C), pages 282-300.
    9. Kirchmaier, Isadora & Prüfer, Jens & Trautmann, Stefan, 2018. "Religion, moral attitudes & economic behavior," Other publications TiSEM 669f51df-0d23-4657-8b16-5, Tilburg University, School of Economics and Management.
    10. Pittau, Maria Grazia & Farcomeni, Alessio & Zelli, Roberto, 2016. "Has the attitude of US citizens towards redistribution changed over time?," Economic Modelling, Elsevier, vol. 52(PB), pages 714-724.
    11. Angel Sharma, 2016. "Managing diversity and equality in the workplace," Cogent Business & Management, Taylor & Francis Journals, vol. 3(1), pages 1212682-121, December.
    12. Esteban, Joan & Levy, Gilat & Mayoral, Laura, 2018. "Liberté, égalité…religiosité," Journal of Public Economics, Elsevier, vol. 164(C), pages 241-253.
    13. Kumru, Cagri S. & Sarntisart, Saran, 2016. "Banking for those unwilling to bank: Implications of Islamic banking systems," Economic Modelling, Elsevier, vol. 54(C), pages 1-12.
    14. Olukayode Emmanuel Maku & Olorunfemi Yasiru Alimi & Fidelis Obioma Ogwumike, 2021. "Transmission Mechanism of Globalization and Its Impact on Human Welfare Development in Sub-Saharan African Countries," Izvestiya, Varna University of Economics, issue 1, pages 45-64.
    15. Amalia, Nadira & Moeis, Jossy P. & Arundina, Tika & Pertiwi, Ristiyanti Hayu & Mardhatillah, Amy, 2021. "Impact analysis of religiosity and altruism on multidimensional inequality;," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 517-525.
    16. 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.
    17. Chen, Yangyang & Murgulov, Zoltan & Rhee, S. Ghon & Veeraraghavan, Madhu, 2016. "Religious beliefs and local government financing, investment, and cash holding decisions," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 258-271.

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    More about this item

    Keywords

    religion; voluntary donations; taxation; redistribution; income inequality;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion

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