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 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 predic-tions 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.