| Abstract: |
Although the relationship between religion and economic development on the
macro-level has been investigated, it is less clear how religious background
influences economic attitudes and financial decision-making on the level of
the individual or household, the micro-level. We use panel data from the
extensive DNB Household Survey, covering the period from 1995 to 2008, to
investigate whether – and through which channel – religious denomination
affects household finance in the Netherlands. We find evidence that, in
general, religious households care more about saving, are more risk-averse,
consider themselves more trusting, have a more external locus of control, and
have a stronger bequest motive. Furthermore, Catholics and Protestants have
longer planning horizons, and Protestants and Evangelicals seem to have a
greater sense of individual financial responsibility. Most of these factors
matter for household financial decision-making, albeit to differing degrees.
Using our religion variables as instruments for economic attitudes (and
controlling for demographic and background risk characteristics), we
demonstrate that the above-mentioned differences in economic beliefs and
preferences explain the higher propensity to save by religious households in
general and the lower investments in risky assets by Catholic households. |