The “Sect Effect” in Charitable Giving: Distinctive Realities of Exclusively Religious Charitable Givers

. An examination of the charitable giving behavior of 16,442 households reveals intriguing patterns consistent with the club‐theoretic approach to religious sect affiliation. The club‐theoretic model suggests that individuals with lower socioeconomic standing will rationally be more likely to align themselves with exclusivistic sects. Because sect affiliation is also associated with more obligatory religious contributions, this approach generates novel predictions not anticipated by standard economic models of charitable behavior. Traditional analysis of charitable giving can mask the “sect effect” phenomenon, as low‐income giving is dwarfed by the giving of the wealthy. However, the application of a two‐stage econometric model—separating the participation decision from the subsequent decision regarding the level of gifting—provides unique insights. Basic socioeconomic factors have significant and opposite associations with different categories of giving, calling into question the treatment of charitable giving as a homogenous activity and supporting the understanding of sect affiliation, and potentially religious extremism, as rational choice phenomena.