TAILIEUCHUNG - Religion and Preferences for Social Insurance

In this paper we argue that religion and welfare state spending are substitute mecha- nisms that insure individuals against adverse life events. As a result, individuals who are religious will prefer lower levels of social insurance provision than will individuals who are secular, and countries that are more religious on average will have lower levels of welfare state spending. In formalizing our argument we also suggest that if benefits fromreligionaresubjecttoaanetworkexternality(Iderivegreaterpleasurefrom religion when others are also religious), it is possible for countries that are similar in terms of underlying conditions to exhibit multiple equilibria. In one equilibrium high religiosity will coexist with low levels of social insurance, while in. | Religion and Preferences for Social Insurance Kenneth Scheve University of Michigan scheve@ David Stasavage London School of Economics d. stasavage@ February 25 2005 Abstract In this paper we argue that religion and welfare state spending are substitute mechanisms that insure individuals against adverse life events. As a result individuals who are religious will prefer lower levels of social insurance provision than will individuals who are secular and countries that are more religious on average will have lower levels of welfare state spending. In formalizing our argument we also suggest that if benefits from religion are subject to a a network externality I derive greater pleasure from religion when others are also religious it is possible for countries that are similar in terms of underlying conditions to exhibit multiple equilibria. In one equilibrium high religiosity will coexist with low levels of social insurance while in a second equilibrium there will be low religiosity and high social insurance. We empirically test our predictions using individual-level data on religiosity individual level data on social insurance preferences and cross-country data on social spending outcomes. The findings are strongly supportive of our hypotheses. 1 Introduction One of the major puzzles for political economy involves the question why some governments adopt policies that intervene heavily to redistribute income from rich to poor and to provide social insurance against adverse events while other governments do much less in either regard. Existing literature on the political economy of redistribution and the welfare state has identified a number of plausible factors that can influence policy outcomes in this area. These include among others prior levels of inequality labor market structure issue bundling and coalition politics constitutional structures and Models produced by economists have also emphasized that countries with otherwise .

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• religion and welfare state
• substitute mecha
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