The Economics of Religious Communities

Abstract

The religious club model is central to the economics of religion. To expand its scope for application, we develop the first model to combine (i) increasing returns to membership, (ii) discrimination, and (iii) religious competition. Any degree of non-rivalry in religious club goods introduces scale effects which require new analytical techniques. Due to increasing returns, a religious leader faces a trade-off between forming a large inclusive club and screening out less committed types to form a small strict club. Endogenous screening makes religious strictness a non-monotonic function of economic development, which is consistent with the emergence of strict sects following periods of liberalization and economic growth. Blanket discrimination against all community members makes the religious community stricter and more cohesive, explaining the survival of religious sects and minorities under persecution. Stigmatizing actively religious members promotes social integration on the whole, but can create an extreme isolationist sect. Contrary to prior work on religious markets, we uncover a mechanism by which religious competition reduces religious participation and boosts social integration. Thus, attempts to moderate religion by stigmatizing participation and restricting competition could backfire. Finally, our model provides guidance for empirical work on religious discrimination and further extensions of the religious club model.