Financial Crisis, Trust, and Religious Intensity

42 Pages Posted: 19 Feb 2021

See all articles by Melissa D. Magdefrau

Melissa D. Magdefrau

Miami University of Ohio - Department of Economics

Prosper Raynold

Miami University; Dept of Economics

Date Written: December 16, 2020


An extant literature rooted in Iannaconne’s club-theoretic approach, advances a social insurance channel via which financial crises lead to increases in religious intensity defined to include religious affiliation and participation. Since variation in religious intensity has implications for; savings behavior, the incidence of religiously motivated terrorism, and the fraction of total resources allocated to religious practice, this social insurance channel implies that the socioeconomic effects of financial crises extends beyond the effects suggested by traditional channels. However, the absence of a demand for supernaturalism in the club-theoretic approach, -- despite the widely held view that religiosity reflects a fundamental demand for supernaturalism -- raises doubt about the adequacy if not validity of the social insurance channel. In light of the foregoing, we deploy an alternative theoretical framework which explicitly incorporates a demand for supernaturalism and implies a relative trust channel in which financial crises affect religious intensity by altering laypeople’s trust in religious organizations relative to their trust in secular institutions. Using responses to survey questions from the General Social Survey for the years 2006, 2008, and 2010, and the yield spread between Baa corporate bonds and ten-year US government bonds as a proxy for financial crisis, we assess the empirical validity of the relative trust channel by deploying Zellner’s SUR approach to test the joint hypothesis that the 2007-2009 financial crisis induced changes in religious participation and affiliation in the US and that it did so by affecting relative trust. Overall, our results confirm the existence of the relative trust channel.

Keywords: Financial Crisis, Relative Trust, Social Insurance, Religious Intensity

JEL Classification: G01, G41, Z12

Suggested Citation

Magdefrau, Melissa D. and Raynold, Prosper, Financial Crisis, Trust, and Religious Intensity (December 16, 2020). Available at SSRN: or

Melissa D. Magdefrau

Miami University of Ohio - Department of Economics ( email )

208 Laws Hall
Oxford, OH 45056
United States

Prosper Raynold (Contact Author)

Miami University; Dept of Economics ( email )

Miami University/Dept of ECON
800 E High St., RM 2054
Oxford, OH 45056
United States
5135294348 (Phone)
45056 (Fax)

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