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Religious Heterogeneity and Fiscal Policy: Evidence from German Reunification

Freier, Ronny; Geys, Benny; Holm, Joshua
Journal article, Peer reviewed
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URI
http://hdl.handle.net/11250/2422310
Date
2016
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  • Publikasjoner fra CRIStin - BI [630]
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Original version
Journal of Urban Economics, 94(2016)July, 1-12   http://dx.doi.org/10.1016/j.jue.2016.05.001
Abstract
Theoretical work based on social identity theory predicts that population diversity

undermines redistributive public policies. This article tests this proposition exploiting

an exogenous shock in diversity due to Germany's reuni cation. In contrast to previous

work on ethno-linguistic or racial heterogeneity, we speci cally analyze religious diversity,

which is an increasingly relevant social cleavage in many countries. Our main results corroborate

that increasing religious diversity leads to a change in scal policies in Bavarian

municipalities over the 1983-2005 period. Moreover, we nd some evidence of declining

individual-level local identi cation over the post-reuni cation period, which suggests that

the observed scal e ects are indeed linked to the theoretical mechanism of individuals'

social identi cation. Finally, we highlight an important mediating role for the democratic

process, since the observed scal e ects strengthen considerably following Bavarian municipalities'

rst local elections after the reuni cation migration wave (March 1996) and a legal

change allowing local referenda on public policies (October 1995).
Description
This is the accepted, refereed and final manuscript to the article
Publisher
Elsevier
Journal
Journal of Urban Economics

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