Serving two masters the effect of state religion on fiscal capacity Antonis Adam & Sofia Tsarsitalidou
By: Adam, Antonis
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Contributor(s): Tsarsitalidou, Sofia.
Material type: 
ArticleSubject(s): CAPACIDAD FISCAL | INCENTIVOS FISCALES | INVERSIONES | INGRESOS FISCALES | ESTADO | RELIGION | MODELOS ECONOMETRICOS
In:
Public Choice v. 194, n. 1-2, January 2023, p. 181–203Summary: This paper examines the effect of having a state religion on fiscal capacity. Our analysis extends the legitimization argument, which postulates that a state religion legitimizes the revenue-raising motives of the state. We then argue that the effect reduces the incentive of the state to invest in fiscal capacity. First, we build a simple theoretical model to highlight our central idea and derive our testable hypothesis. The model shows that in the presence of a legitimization effect, countries with a state religion face weaker incentives to invest in fiscal capacity, as they can raise revenue by exploiting the legitimizing power of the church. Next, we test the hypothesis in a potential outcomes model, which models the selection on observables using both recent and historical data. We show, always following our theoretical model, that countries with a state religion have lower fiscal capacity.
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| OP 1443/2023/194/1/2 Public Choice | OP 1443/2023/194/1/2-1 The redistributive politics of monetary policy | OP 1443/2023/194/1/2-2 Strategic effects of stock pollution | OP 1443/2023/194/1/2-3 Serving two masters | OP 1443/2023/194/3/4 Public Choice | OP 1443/2023/194/3/4-1 How not to write a constitution | OP 1443/2023/194/3/4-2 Turning out for redistribution |
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This paper examines the effect of having a state religion on fiscal capacity. Our analysis extends the legitimization argument, which postulates that a state religion legitimizes the revenue-raising motives of the state. We then argue that the effect reduces the incentive of the state to invest in fiscal capacity. First, we build a simple theoretical model to highlight our central idea and derive our testable hypothesis. The model shows that in the presence of a legitimization effect, countries with a state religion face weaker incentives to invest in fiscal capacity, as they can raise revenue by exploiting the legitimizing power of the church. Next, we test the hypothesis in a potential outcomes model, which models the selection on observables using both recent and historical data. We show, always following our theoretical model, that countries with a state religion have lower fiscal capacity.
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