Religion and income: Heterogeneity between countries

This paper tests whether the behaviour of households in different countries is homogeneous with respect to the influence of religion on income. The violation of the homogeneity assumption would have two consequences. First, results based on country studies might not be applicable to other countries. Second, one should be careful when pooling cross-country data in this type of research. Data at household level from the European and World Values Survey are pooled for 25 western countries. We estimate simultaneously an income and a religion equation to correct for the endogeneity of religiousness. We find that estimation outcomes are different for low- and high-income countries: whereas church membership is found to have a positive effect on income for high-income countries, this effect is negative for low-income countries. This result is robust to denominational distribution, participation effects and alternative measures of religiousness.