The Political Economy of Religious Spending

Religious institutions are major providers of public goods, with investments that can affect public policy and political competition. But is religious spending driven by political considerations? To tackle this question, we build a novel index for individual religious values, and use it to gauge the religiosity of 85,358 mayoral candidates in 45,797 municipal elections, held in Italy between 1995 and 2021. With a regression discontinuity design, we show that the Catholic Church doubles its investments in municipalities governed by religious mayors. This boost in Church’s investments is likely motivated by strategic complementarities with the spending decisions of mayors. Using data on more than 6 million procurement contracts, we show that religious mayors significantly increase municipal spending for religious goods and services, especially in the field of education. This shift in public goods provision significantly boosts citizens’ attachment to religion, and it increases their propensity to enroll children in religious schools and to donate money to religious NGOs. These findings shed new light on the interactions between the state and religious institutions, and their downstream effects on citizens’ attitudes and socioeconomic choices.