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Religion, Income Inequality, and the Size of the Government

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

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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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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  1. Evelyn Lehrer, 1996. "Religion as a determinant of marital fertility," Journal of Population Economics, Springer, vol. 9(2), pages 173-196, June.
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  14. repec:pse:psecon:2005-43 is not listed on IDEAS
  15. Robert Barro & Rachel M. McCleary, 2003. "International Determinants of Religiosity," NBER Working Papers 10147, National Bureau of Economic Research, Inc.
  16. McCleary, Rachel & Barro, Robert, 2003. "Religion and Economic Growth across Countries," Scholarly Articles 3708464, Harvard University Department of Economics.
  17. Azzi, Corry & Ehrenberg, Ronald G, 1975. "Household Allocation of Time and Church Attendance," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 27-56, February.
  18. Schneider, Friedrich G., 2007. "Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 1, pages 1-66.
  19. Donald Cox & Fredric Raines, 1985. "Interfamily Transfers and Income Redistribution," NBER Chapters, in: Horizontal Equity, Uncertainty, and Economic Well-Being, pages 393-426 National Bureau of Economic Research, Inc.
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