Monday, October 27, 2008

Religion and Recession

In a paper a few years back, Clarke and Lelkes tested the idea that religiosity offered insurance against the stress of shocks such as recession. As well as being generally happier, more religious people are also less affected by losing their job. The authors even speculate that this might influence the type of state systems that people choose and argue that the religion as insurance concept might explain the lower safety nets in some European countries.

Religion as Insurance

The role of other non-monetary forms of insurance against losing your economic status during a recession have also been widely discussed. The role of networks of social interactions bound up in the concept of "social capital" is discussed in several papers. Social capital can directly affect our monetary position through offering access to informal credit and labour market networks. It may also buffer people against psychological isolation experienced during the course of a transition from the labour market.

The other aspect examined frequently in the literature is the role of the "set-point", a fixed level of well-being that we carry with us as a disposition. The idea being that no matter how bleak the economic environment becomes, some people have a cheerful and optimistic disposition that will carry them through any circumstances. The extent to which the set-point is a good description of well-being is one of the big topics in this literature. Those who believe it a good description point to the famous Brickman et al paper that showed remarkable returns to baseline happiness among people who had been paralysed and people who won the lottery. However, several papers including the one below have found that life satisfaction can be adjusted permanently by stressful life events. The second paper is particularly strong on the idea that we adapt to many things but that unemployment, particularly for men, is genuinely life altering in a negative sense.

Clark, Andrew E & Georgellis, Yannis & Sanfey, Peter, 2001. "Scarring: The Psychological Impact of Past Unemployment," Economica, London School of Economics and Political Science, vol. 68(270), pages 221-41, Ma

AndrewE. Clark & Ed Diener & Yannis Georgellis & RichardE. Lucas, 2008. "Lags And Leads in Life Satisfaction: a Test of the Baseline Hypothesis," Economic Journal, Royal Economic Society, vol. 118(529), pages F222-F243, 06.


Martin Ryan said...

While we are on religion, I found an intereasting paper on attitudes to risk and religion: "Risk-Averse by Nation or by Religion?" (Stephan Bartke • Reimund Schwarze: SOEP Multidisciplinary Papers on Panel Data, 2008).

The authors analyze two possible
determinants of individual risk attitudes: nationality and religion. They use the German Socio-Economic Panel (SOEP).
To understand the importance of nationality, they focus on emigrants to Germany.
The key findings are:

(1) Nationality is not a valid determinant of risk attitudes. It
can be broken down into several constituent factors including religion.

(2) Religiousness is a significant determinant of risk attitudes. Religious persons are
less risk-tolerant than atheists. Moreover, religious affiliation matters: Muslims are
less risk-tolerant than Christians.

It would be interesting to see if this determinant (i.e. religiosity) of risk attitudes might differ across ups and downs in the economic cycle. Also, if we are to believe the Clarke and Lelkes idea that religiosity offers insurance against the stress of shocks such as recession, why do religious people show up in the SOEP to be less tolerant of risk in general?

The Bartke and Schwarze paper is available here:

Martin Ryan said...