Serving two masters: the effect of state religion on fiscal capacity

Antonis Adam and Sofia Tsarsitalidou

Public Choice, 2023, vol. 194, issue 1, No 7, 203 pages

Abstract: Abstract 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.

Keywords: Fiscal capacity; State religion (search for similar items in EconPapers)
JEL-codes: E62 H20 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Serving two masters: The effect of state religion on fiscal capacity (2019)
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DOI: 10.1007/s11127-022-01025-w

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