Religion and Financial Hardship

Abstract

This paper investigates whether religion shapes household financial outcomes. To address selection into religiosity, we employ an instrumental variable strategy that exploits arguably exogenous within-school, cross-cohort variation in peer influences during adolescence. We document that more religious households are less likely to experience financial hardship. This buffering effect is most pronounced among low socioeconomic status groups. Further investigation reveals that greater religiosity lowers the likelihood of financial hardship by improving patience, enhancing self-control, and easing psychological distress.

Keywords: religion, financial hardship, self-control, psychological distress

JEL Classification: D91, G4, G5, Z12