The Political Economy of Beliefs: Why Fiscal and Social Conservatives/Liberals (Sometimes) Come Hand-in-Hand

Abstract

Why are religious groups with greater within-group charitable giving more socially conservative and opposed to the welfare state? We propose and test a theory where religious provision of social insurance explains why fiscal and social conservatism align. The alignment disappears when there is a state church and reverses for members of a state church. This reversal is unlikely to be driven by omitted environmental variables: exogenous increases in church-state separation precede increases in the alignment between fiscal and social conservatism. The theory provides a novel explanation for religious history: as elites gain access to alternative social insurance, they judiciate increasing church-state separation to create a constituency for lower taxes. This holds if religious voters exceed non-religious voters, otherwise, elites prefer less church-state separation in order to curb the secular left, generating multiple steady states where some countries sustain high church-state separation, high religiosity, and low welfare state, and vice versa. We use this framework to explain the changing nature of religious movements, from Social Gospel to the Religious Right, and why church-state separation arose in the U.S. but not in many European countries.

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Reference

Daniel L. Chen, and Jo Thori Lind, “The Political Economy of Beliefs: Why Fiscal and Social Conservatives/Liberals (Sometimes) Come Hand-in-Hand”, TSE Working Paper, n. 16-722, October 2016.