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The effect of church tax on church membership

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  • Lyytikäinen, Teemu
  • Santavirta, Torsten

Abstract

Abstract In this study we examine the effect of church tax on the church membership decision using Finnish data. We present both descriptive statistics from an opting-out website and econometric evidence exploiting the panel structure of a large individual-level data set. Our descriptive analysis shows that opting-out is concentrated towards the last days of the year, i.e., the last chance to avoid paying church tax for the entire coming year. Our econometric evidence suggests however, that the average effect of tax incentives in the whole population is very small in magnitude, while being statistically significant. The price elasticity of church membership is roughly -0.01. In addition, we find that church membership dropped substantially when a law change made opting-out significantly easier. This finding suggests that transaction costs play an important role in the membership decision.

Suggested Citation

  • Lyytikäinen, Teemu & Santavirta, Torsten, 2010. "The effect of church tax on church membership," Working Papers 20, VATT Institute for Economic Research.
    • Handle: RePEc:fer:wpaper:20
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    File URL: https://www.doria.fi/handle/10024/148759
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    References listed on IDEAS

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    3. Jonathan Gruber, 2004. "Pay or Pray? The Impact of Charitable Subsidies on Religious Attendance," NBER Working Papers 10374, National Bureau of Economic Research, Inc.
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    5. Gruber, Jonathan & Hungerman, Daniel M., 2007. "Faith-based charity and crowd-out during the great depression," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1043-1069, June.
    6. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1149-1187.
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    10. Jonathan Gruber & Daniel M. Hungerman, 2008. "The Church Versus the Mall: What Happens When Religion Faces Increased Secular Competition?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 831-862.
    11. Laurence R. Iannaccone, 1998. "Corrigenda [Introduction to the Economics of Religion]," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1941-1941, December.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The Demand Curve for Religion
      by Daniel Hamermesh in Freakonomics on 2012-11-20 21:05:12

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    Cited by:

    1. Eerola, Essi & Lyytikäinen, Teemu, 2015. "On the role of public price information in housing markets," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 74-84.
    2. Benjamin Bittschi & Sarah Borgloh & Berthold U. Wigger, 2020. "Philanthropy in a Secular Society," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(4), pages 640-664.
    3. Bittschi, Benjamin & Borgloh, Sarah & Wigger, Berthold, 2015. "Secularization, tax policy and prosocial behavior," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113065, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Church tax; church membership; transaction cost; Taxation; Verotus; Taxation and Social Transfers; Julkisen talouden rahoitus ja tulonsiirrot; H240 - Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes; H310 - Fiscal Policies and Behavior of Economic Agents: Household (effects on labor supply); Z120 - Cultural Economics: Religion;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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