Religion and the Shadow Economy
Centre for European Economic Research (ZEW)
Johannes Kepler University Linz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)
June 1, 2011
ZEW - Centre for European Economic Research Discussion Paper No. 11-038
Religion is increasingly acknowledged to be a cultural dimension which affects economic outcomes in different regards. This contribution focuses on religion’s possible impact on the shadow economy. Different dimensions of the religious markets are taken into account. These dimensions refer to the overall degree of religiosity, the specific impact of different religions, religious competition or the proximity between religion and the state. The empirical test makes use of the largest available cross-section on the size of the shadow economy and matches this dataset with numerous religious indicators. Summary measures of general religiosity or indicators of religious competition do not have a measurable impact. However, robust differences emerge across religions. Countries dominated by Islam or Eastern religions are associated with smaller shadow economies compared to Christian countries. Furthermore, the proximity between state and religion matters. Close ties between both are typical for smaller shadow economies. This is in line with the view that religion uses its normative influence to protect state interests if there is a mutually beneficial relationship.
Number of Pages in PDF File: 41
Keywords: Economics of religion, tax morale, shadow economy
JEL Classification: O17, O57, Z12, H26working papers series
Date posted: June 16, 2011
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