The Political Economy of Beliefs: Why Fiscal and Social Conservatives/Liberals Come Hand-in-hand

Abstract

Religious intensity as social insurance may explain why fiscal and social conservatives and fiscal and social liberals tend to come hand-in-hand. We find evidence that religious groups with greater within-group charitable giving are more against the welfare state and more socially conservative. The alliance reverses (social conservatives become fiscal liberals) for members of a state church and this reversal is unlikely to be driven by omitted environmental variables: increases in church-state separation precede increases in the alliance between fiscal and social conservatism. The theory provides a novel explanation for religious history: as elites gain access to alternative social insurance, they increase church-state separation to create a constituency for lower taxes. This holds if religious voters exceed non-religious voters, otherwise, elites prefer less church-state separation in order to curb the secular left, generating multiple steady states where some countries sustain high church-state separation, high religiosity, and low welfare state, and vice versa. We use this framework to explain the changing nature of religious movements, from Social Gospel to the religious right, and why church-state separation arose in the U.S. but not in many European countries.

Keywords: voting, religion, ideology, church-state separation, welfare state

JEL Classification: D31, D71, D72, D78, I38, Z12