Religious Charities and Government Funding

By Reda, Ayman | International Advances in Economic Research, August 2012 | Go to article overview

Religious Charities and Government Funding

Reda, Ayman, International Advances in Economic Research

Abstract The government has the responsibility of providing a social service to its citizens. It decides whether to award funds to a religious nonprofit, secular nonprofit, or to produce the service itself. Religious charities are willing to provide the service at lower costs if they can use the funds as an opportunity to proselytize their doctrine. This proselytizing alters the religious preferences of believers in society. In a situation of equal grants to religious charities, this has the consequence of reducing the number of extremists. Furthermore, conservative religious denominations may discriminate against non-religious individuals in the provision of the social service.

Keywords Charities * Nonprofits * Religion * Government * Faith-based

JEL L3 * Z12 * H5


On 29 January 2001, the White House Office of Faith-Based and Community Initiatives was established with the objective of creating a partnership with faith-based agencies in order to achieve common goals in the field of social service provision. This development raised strong arguments with regards to its legality under the laws of the Constitution. It also initiated an extensive debate from all interested parties on the effectiveness of faith-based social service providers in relation to other providers, and whether or not they possess special advantages that warrant any special treatment from the government. This debate will continue and even intensify as the program progresses. Religious denominations and agencies will be in constant competition to acquire government funding in order to achieve their specific interests. Political parties now have a useful tool that they can refer to during elections when in need of religious endorsements. It seems that without careful examination, such an initiative may not necessarily lead to the desired productive partnership that many would hope for or expect.

The purpose of this paper is to examine important aspects of the relationship between religious nonprofits and the government. The paper presents an economic model that describes this relationship in order to give us an insight into the different motives of these institutions and the social and religious outcomes that arise as a result of their interaction. We study this relationship by investigating the impact of government funding on religious charities and on religion in the society as a whole. The model derives results that have important policy implications for present and future programs by the government to fund religious and secular charities. It raises many significant issues that are sometimes overlooked by many parties involved in the debate.

Literature Review

An essential component of the nonprofit sector consists of religious charities and faith-based agencies. The vast majority of the theoretical literature on the economics of nonprofits has focused on the choices of private donors, the economic functions and decisions of nonprofit agencies, and the impact of income and wealth redistribution policies by the public sector on the decisions of donors and nonprofits. (1) There has been minimal examination of the impact of government policies on the religious state of society, both at the individual and group level. In addition, the models have treated all types of nonprofits identically, while none have sought to examine religious nonprofits in particular.

The majority of empirical work on religious nonprofits has been in the fields of sociology of religion and religious studies research. These empirical studies have aimed to study the unique nature of religious charities and also to present comparative analysis with secular or for-profit organizations. In their study of faith-based agencies in Texas, where the concept of the Faith-Based Initiative was first implemented, Ebaugh et al. (2003) argue that faith-based agencies do not differ from secular agencies in the types of services they provide to their recipients. …

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