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THE POLITICAL ECONOMY OF BELIEFS:WHY FISCAL AND SOCIAL CONSERVATIVES/LIBERALS COME HAND-IN-HANDDaniel L. Chen and Jo Thori Lind*AbstractReligious intensity as social insurance may explain why fiscal and social conservatives and fiscaland social liberals tend to come hand-in-hand. We find evidence that religious groups with greater within-groupcharitable giving are more against the welfare state and more socially conservative. The alliance reverses formembers of a state church and increases in church-state separation precede increases in the alliance between fiscaland social conservatism. The theory provides a novel explanation for religious history: as elites gain access toalternative social insurance, they increase church-state separation to create a constituency for lower taxes. Thisholds if religious voters exceed non-religious voters, otherwise, elites prefer less church-state separation in order tocurb the secular left, generating multiple steady states where some countries sustain high church-state separation,high religiosity, and low welfare state, and vice versa. We use this framework to explain the changing nature ofreligious movements, from Social Gospel to the religious right, and why church-state separation arose in the U.S.but not in many European countries.JEL classification:D31, D71, D72, D78, I38, Z12Keywords:Voting, Religion, Ideology, Church-State Separation, Welfare State*Daniel L. Chen, [email protected], Toulouse School of Economics, Institute for Advanced Study in Toulouse,University of Toulouse Capitole, Toulouse, France; Jo Thori Lind, [email protected], Department of Economics,University of Oslo. First draft: March 2005. Current draft: August 2019. Latest version at:papers/The_Political_Economy_of_Beliefs.pdf. We thank research assistants and numerous colleagues at severaluniversities and conferences. Work on this project was conducted while Chen received financial support from AlfredP. Sloan Foundation (Grant No. 2018-11245), European Research Council (Grant No. 614708), Swiss National Sci-ence Foundation (Grant Nos. 100018-152678 and 106014-150820), Agence Nationale de la Recherche, John M. OlinFoundation, Ewing Marion Kauffman Foundation, Templeton Foundation (Grant No. 22420), National Institute forChild Health and Human Development, and UCLA International Institute; and while Lind received financial supportfrom the Research Council of Norway through the Equality, Social Organization, and Performance (ESOP) Center(project number 179552).1
From abolition [of slavery] to woman suffrage to civil rights, the leaders of America’s most successfulliberal crusades have turned to the Bible to justify their causes. But the history of the religious left seemsto stop in 1968, the starting point of a decades-long trend by which Democrats have become the secularparty and the Republicans the religious party (Lizza 2005).

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