NCPA - National Center for Policy Analysis

IN TIMES OF STRESS, CAN RELIGION SERVE AS INSURANCE?

September 12, 2005

People accumulate savings and insurance to protect themselves economically from layoffs, bad health and hurricanes, but economists say these formal strategies are not the only way to guard against sudden income shocks. Social networks and religious affiliation may also serve as a safety net, according to the New York Times.

A National Bureau of Economic Research study examined religious affiliation and measured two different kinds of well-being.

First, researchers measured household contributions to religious charities as a marker of religious participation. They found:

  • About 40 percent of households make contributions to a religious organization, with contributions representing about 1.2 percent of household income.
  • Looking at spending before and after income goes up or down, the study authors found that religious household spending fluctuates about 30 percent less than spending by similar, nonreligious households.
  • The insurance effect shows up most among those who give relatively little to religious groups and is strongest for whites, where religious affiliation buffers consumption against 35 percent of the impact of income shocks.

Next, they looked at a more direct measure of well-being from how respondents assess their personal happiness on a seven-point scale:

  • Using religious attendance as a measure of affiliation, whites get no significant "happiness insurance" from religious affiliation, while for blacks, the median level of attendance reduces the impact of income shocks on happiness by about 75 percent; the effect is greatest among those with a high school education or less.
  • The results are the same for religious belief as for attendance, since the two are so closely connected, but attendance matters most.

The authors say that while religion does not insure income, it does change how one reacts to negative shocks. As for Hurricane Katrina, they say religious individuals should be less hurt in terms of their sense of well-being.

Source: Virginia Postrel, "In Times of Stress, Can Religion Serve as Insurance?" New York Times, September 8, 2005; and Rajeev Dehejia, Thomas DeLeire, and Erzo F. P. Luttmer, "Insuring Consumption and Happiness Through Religious Organizations," National Bureau of Economic Research, Working Paper No. 11576, August 2005.

For text (subscription required):

http://www.nytimes.com/2005/09/08/business/08scene.html

For National Bureau of Economic Research study:

http://papers.nber.org/papers/w11576.pdf

For Consumer Expenditure Survey:

http://www.bls.gov/cex/home.htm

For National Survey of Families and Households:

http://www.ssc.wisc.edu/nsfh/

 

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