Monday, 30 March 2015

Agricultural Risk and the Spread of Religious Communities

New EHES working paper

Is the spread of religious communities related to economic risk? Historically, religious communities have often been the only source of support beyond the family. The social support provided by religious communities appears to be a type of informal mutual insurance especially valuable in historical agricultural societies exposed to much economic risk and without formal insurance mechanisms. Economic risk could therefore have contributed to the spread of today’s major religious communities, and beliefs in the spiritual rewards of mutual aid and charity, but empirical evidence is lacking.

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In their new EHES working paper, Philipp Ager and Antonio Ciccone use historical census data for the United States to examine the link between economic risk and the spread of religious communities. The authors’ central conclusion is that religious communities are more widespread where populations face greater common risk.

The paper integrates two existing ideas – religious communities can sustain mutual insurance against at least some risks, and religious membership is a social activity that reduces time for other activities – into a model where agricultural output of farmers in a location is subject to idiosyncratic risk and to common, county-level rainfall risk. While idiosyncratic risk is partially insurable within a county’s religious communities, common rainfall risk is not. The authors show that when relative risk aversion is in the empirically relevant range, the value of mutual insurance against idiosyncratic risk within a county’s religious communities increases with common rainfall risk. This implies that a larger part of the population will be members of a religious community in counties with greater rainfall risk, holding expected agricultural productivity constant.

Ager and Ciccone evaluate this hypothesis by examining whether in the nineteenth century United States, churches in counties with greater rainfall risk had more total members or a greater combined seating capacity relative to population. In the United States, religious communities are widely regarded as having been the main source of social assistance, especially in agricultural regions, until the rise of government social spending at the beginning of the twentieth century. The available financial accounts of nineteenth-century churches indicate substantial expenditures on local relief and charity. There is also extensive historical evidence that local religious community members supported each other in case of need. Consistent with the historical narrative and the theoretical analysis the authors find a statistically and quantitatively significant link between membership in religious communities and rainfall risk in 1890, 1870, and 1860.



This blog post was written by Philipp Ager, Assistant Professor of Economics at the University of Southern Denmark, Odense.

The working paper can be downloaded here:
http://www.ehes.org/EHES_74.pdf

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