The Economics of Religious Communities: Social Integration, Discrimination and Radicalization

Abstract

Social isolation and radicalization of communities is a major concern for multicultural societies. This paper examines the economics of religious communities in the first model to combine network externalities, religious competition and cultural dynamics. Social integration depends in surprising ways on both external conditions, such as economic opportunities and discrimination, and the choices of religious leaders. We identify two dynamic radicalization strategies available to a religious leader. An extremist influence strategy involves forming a small but strict group of extremists and using them to radicalize the community over time. A niche construction strategy involves raising religious strictness to induce blanket discrimination against community members and weaken their outside options. This enables the leader to further raise strictness and eventually isolate the community completely. These radicalization strategies are aided by some forms of discrimination against community members and undermined by others. Religious competition eliminates radicalization by tying religious strictness to the preferences of religious consumers. The analysis is applied to Muslim communities in Europe.

Keywords: economics of religion, club goods, cultural transmission, discrimination

JEL Classification: D23, Z12