Sect, Subsidy and Sacrifice: An Economist's View of Ultra-Orthodox Jews

Abstract

The Israeli Ultra-Orthodox population doubles each seventeen years. With 60% of prime-aged males attending Yeshiva rather than working, that community is rapidly outgrowing its resources. Why do fathers with families in poverty choose Yeshiva over work? Draft deferments subsidize Yeshiva attendance, yet attendance typically continues long after they are draft exempt. I explain this puzzle with a club good model in which Yeshiva attendance signals commitment to the community, which acts as an extremely efficient and generous mutual-insurance club. Subsidizing membership in a club with sacrifice as an entry requirement induces increased sacrifice, compounding the distortion and dissipating the subsidy. Policies treating members and potential entrants equally are Pareto improving. The analysis may generalize to radical Islamic sects and other "fundamentalist" groups. These also practice mutual insurance and also seem to respond to incursion of markets by increasing the stringency of prohibitions, which may explain their high fertility rates.

JEL Classification: H2, I3, J1, J2, N0, O1, Z1