Business Research

The Economics of Religion

While religion, politics and money may be taboo topics at a dinner party, they are inexorably linked, according to a research team that included Baylor faculty members. The team studied the relationship between religion and economic prosperity, and the impact of government involvement on religious attendance worldwide.

The team, which included Baylor associate professor of Economics Charles North; Byron Johnson, professor of Sociology and co-director of the Baylor Institute for the Studies of Religion (ISR); and Rodney Stark, Baylor professor of the Social Sciences and co-director of ISR; studied historical data and collected new information through a grant given by the John Templeton Foundation.

The first part of their study explored the level of rule of law and corruption in 207 countries based on what each country's largest religion was in both 1900 and 2000. They concluded that current rule of law is higher in countries that were Protestant, Catholic, and Hindu in 1900 compared to those whose largest religion in 1900 was African tribal religion, Islam, or Orthodox Christianity. They found similar results on corruption being lower in countries that were Protestant in 1900, but not for Catholic or Hindu countries. When they looked at the largest religion in 2000, they found that countries that are currently Asian folk religion have higher current rule of law and lower corruption than all other countries, with the rest all looking the same.

"In both instances, we are looking at the current level of rule of law or corruption; we distinguish among the 207 countries based on what their largest religion was in 1900 or in 2000. What changes between those two years is that many countries (mostly in Africa and the Pacific Islands) switched from an ethnic religion to Protestantism, Catholicism, or Islam," North said. "So what that tells us is that ‘missionizing' and converting everyone to Christianity cannot improve the quality of rule of law or the degree of corruption, at least not in a span of decades."

The second part of the study collected new data exploring the link between religion and financial indicators.

"One of the biggest things this grant allowed us to do was conduct a new survey," North said. "We're still working out the conclusions, but we now have one of the few data sets out there that looks at religion and finance."

One observation made by researchers is that people who attended church regularly as children received about a half-year more education than their counterparts who did not frequently attend religious services.

There could be any number of reasons for this finding, according to North, who says researchers are still working on what the data means.

"It could be the ‘good kid effect,' in that going to church means you learn to sit still and pay attention. Sitting still and paying attention means you'll do better in school," North said. "Or, it could be that educated people are more likely to go to church, so their children go to church. And educated parents are more likely to have educated children. There are so many factors to consider."

The survey also asked people about homeownership, an often-used economic indicator.

"We wanted to see if religious people save money differently than non-religious people," North said.

So far, the team has found no significant differences across the United States, but North said that does not mean others won't analyze the data and come up with their own findings.

"Right now there is a researcher at the International Monetary Fund who's using our data and other data to explore the variability of home prices by looking at how an Evangelical presence impacts the housing market," North said. "So, while there is analysis being done here, the bigger picture is that our new data set is also being used by researchers elsewhere."

Another part of the Baylor study examined how government involvement affects religiousness, and the outcome was surprising to some.

"We have solid evidence that the more the state is involved in religion, the less religious people are," North said.

Researchers examined issues of church and state in international samples, and discovered that in those countries that have state religions, there is significantly less attendance at religious services. This finding is true of attendees of the state religion as well as other religions. They also found that the more the freedom of religion was protected in a country, the greater religious attendance there was.

"The countries that are the most religious are the ones with very little regulation and no state religion," North said. "We also found that the longer a country had maintained a constitutional protection of freedom of religion, the more religious the people are."

While the United States government does subsidize religious organization through tax breaks, North believes that because it is done in much the same way that other charitable organizations are subsidized, this is not perceived as government interference.

"The lesson here is that governments should not play favorites with religions," North said. He used the example of Germany, where approved religious organizations have much more freedom to function than those that are not government-approved. "There is good evidence that this kind of favoritism creates less religiosity."

North and his colleagues also believe this is good reason to defend religious freedom. Reciting prayers of one religion in public schools, for example, can have the opposite of the desired effect, driving more people away from religion.

"If we had a homogeneous society, we might see short-term benefits, but in the long term it would be a disaster," he said. "The last thing a large religious body wants is to have government on their side."

Charles North
Baylor University