Believe, But Verify? - The Effect of Market Structure on Corruption In Religious Organizations

Abstract

This first cross-country analysis of the causes of corruption in religious organizations provides evidence in support of policy recommendations by Adam Smith. He argued that clergy are best constrained by competition among religious groups. Their appointment and promotion should, however, be regulated by the state. Both factors are shown to confine corruption. In contrast, David Hume’s approach of supporting state religion and limiting entry into the religious market is not a promising strategy for mitigating religious corruption. More generally, these results suggest that the private sector may indeed be shielded from sprawling corruption as long as markets are sufficiently competitive.

Keywords: Determinants of Corruption, Religious Market, Regulation, State Religion

JEL Classification: D73, K4, L38, L51, Z12