The Economics of Religious Communities

44 Pages Posted: 1 Oct 2020 Last revised: 7 Apr 2021

See all articles by Jean-Paul Carvalho

Jean-Paul Carvalho

Department of Economics, University of Oxford

Michael Sacks

Clarkson University

Date Written: April 5, 2021


The religious club model is central to the economics of religion. To expand its scope for application, we develop the first model to combine (i) increasing returns to membership, (ii) discrimination, and (iii) religious competition. Any degree of non-rivalry in religious club goods introduces scale effects which require new analytical techniques. Due to increasing returns, a religious leader faces a trade-off between forming a large inclusive club and screening out less committed types to form a small strict club. Endogenous screening makes religious strictness a non-monotonic function of economic development, which is consistent with the emergence of strict sects following periods of liberalization and economic growth. Blanket discrimination against all community members makes the religious community stricter and more cohesive, explaining the survival of religious sects and minorities under persecution. Stigmatizing actively religious members promotes social integration on the whole, but can create an extreme isolationist sect. Contrary to prior work on religious markets, we uncover a mechanism by which religious competition reduces religious participation and boosts social integration. Thus, attempts to moderate religion by stigmatizing participation and restricting competition could backfire. Finally, our model provides guidance for empirical work on religious discrimination and further extensions of the religious club model.

Keywords: Economics of religion, discrimination, club goods, extremism

JEL Classification: D23, Z12

Suggested Citation

Carvalho, Jean-Paul and Sacks, Michael, The Economics of Religious Communities (April 5, 2021). Available at SSRN: or

Jean-Paul Carvalho

Department of Economics, University of Oxford ( email )

10 Manor Rd
Oxford, OX1 3UQ
United Kingdom

Michael Sacks (Contact Author)

Clarkson University ( email )

Potsdam, NY 13699
United States

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