Financial Crisis, Trust, and Religious Intensity

An extant literature rooted in Iannaconne’s club-theoretic approach, advances a social insurance channel via which financial crises lead to increases in religious intensity defined to include religious affiliation and participation. Since variation in religious intensity has implications for; savings behavior, the incidence of religiously motivated terrorism, and the fraction of total resources allocated to religious practice, this social insurance channel implies that the socioeconomic effects of financial crises extends beyond the effects suggested by traditional channels. However, the absence of a demand for supernaturalism in the club-theoretic approach, -- despite the widely held view that religiosity reflects a fundamental demand for supernaturalism -- raises doubt about the adequacy if not validity of the social insurance channel. In light of the foregoing, we deploy an alternative theoretical framework which explicitly incorporates a demand for supernaturalism and implies a relative trust channel in which financial crises affect religious intensity by altering laypeople’s trust in religious organizations relative to their trust in secular institutions. Using responses to survey questions from the General Social Survey for the years 2006, 2008, and 2010, and the yield spread between Baa corporate bonds and ten-year US government bonds as a proxy for financial crisis, we assess the empirical validity of the relative trust channel by deploying Zellner’s SUR approach to test the joint hypothesis that the 2007-2009 financial crisis induced changes in religious participation and affiliation in the US and that it did so by affecting relative trust. Overall, our results confirm the existence of the relative trust channel.