Religion and the Shadow Economy

41 Pages Posted: 16 Jun 2011

See all articles by Friedrich Heinemann

Friedrich Heinemann

ZEW – Leibniz Centre for European Economic Research; University of Heidelberg - Alfred Weber Institute for Economics

Friedrich Schneider

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)

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Date Written: June 1, 2011

Abstract

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.

Keywords: Economics of religion, tax morale, shadow economy

JEL Classification: O17, O57, Z12, H26

Suggested Citation

Heinemann, Friedrich and Schneider, Friedrich G., Religion and the Shadow Economy (June 1, 2011). ZEW - Centre for European Economic Research Discussion Paper No. 11-038, Available at SSRN: https://ssrn.com/abstract=1865258 or http://dx.doi.org/10.2139/ssrn.1865258

Friedrich Heinemann (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

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University of Heidelberg - Alfred Weber Institute for Economics ( email )

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Heidelberg, D-69117
Germany

Friedrich G. Schneider

Johannes Kepler University Linz - Department of Economics ( email )

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Austria
+43 732 2468 8210 (Phone)
+43 732 2468 8208 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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