Church and State

Church and state have historically had an uneasy relationship, sometimes close allies, at others harsh adversaries, and at still others largely independent of one another. This paper develops an economic model of this relationship, where the state's objective is to maximize net tax revenue, while the church provides religious goods. Religious goods benefit the state in two ways: first, they provide utility to citizens, thus allowing the state to extract more taxes before running up against citizens' reservation utility (the point at which they would revolt), and second, they potentially provide legitimacy to the state, thereby lowering the costs of tax collection. If the latter effect is strong enough, the state may find it optimal to take control of the church, either to enhance its legitimizing effect, or to suppress its de-legitimizing effect. To evaluate the model's implications, we use recent cross-country data on the relationship between religion and state, including measures coded from the 2001, 2003, and 2005 International Religious Freedom reports. We also examine in more detail some of the paradigmatic cases indicated by the model, presenting various types of evidence from current and historical examples of each case.

A Model of Endogenous Union Density and Membership

We develop a theoretical model of endogenously determined union density and union membership. A union is formed, continued, or dissolved by majority voting. Given the profitability, production technology, and labor and product market conditions, the union determines the reservation wage that is acceptable to the firm. Based on this reservation wage and other subjective factors, workers vote for or against the union. If the union is formed, the firm determines the employment level at the union wage.