A number of researchers have found striking correlations between religion and various measures of well being. For example, religious participation is correlated with lower levels of deviant behavior and better health. And, attending religious services weekly, rather than not at all, has the same effect on individuals' reported happiness as moving from the bottom to the top quartile of the income distribution.
However, the same factors that determine religious attendance may also determine these outcomes; for example, it may be that happier people go to church, not that going to church makes you happier. Jonathan Gruber seeks to solve the problem of estimating the effects of religious participation on earnings and other economic measures. His solution draws on the fact that individuals are more likely to attend religious services if they live near others of their religion (that is, where there is a "higher density of co-religionists" in Gruber's terms). Catholics who live in more heavily Catholic areas attend church more than those who live in less Catholic areas. Further, living near others of one's religion can be predicted by living near others in certain ethnic groups that share the religious preferences of your ethnic group. For Italian Catholics, for example, living near persons of Polish extraction will mean being more likely to be near other Catholics than, say, living near persons of Swedish extraction. Yet living near persons of Polish rather than Swedish extraction should not affect any other aspect of the Italians' life, so that any effects of living near such "complementary" ethnic groups should reflect religious attendance only.
Gruber first uses data on religious preferences, ethnic heritage, and religious participation from the General Social Survey to show that the people living in an area with a higher density of co-religionists are more likely to participate in religious activities. This is true even after controlling for general differences in religiosity across areas and across ethnic groups. Moreover, they are no more likely to participate in other civic or social enterprises, suggesting that this co-religionist density measure is having effects only through religious participation.
He then turns to the 1990 U.S. Census to measure the effects of co-religionist density on economic outcomes such as education, income, employment, welfare participation, disability, marital status, and number of children. Gruber's results suggest a "very strong positive correlation" between religious market density, religious participation, and positive economic outcomes." People living in an area with a higher density of co-religionists have higher incomes, they are less likely to be high school dropouts, and more likely to have a college degree." Living in such an area also reduces the odds of receiving welfare, decreases the odds of being divorced, and increases the odds of being married. The effects can be substantial. Doubling the rate of religious attendance raises household income by 9.1% decreases welfare participation by 16% from baseline rates, decreases the odds of being divorced by 4%, and increases the odds of being married by 4.4%.
Gruber concludes that being in an area with more co-religionists leads to better economic outcomes through the channel of increased religious participation. Although this paper does not investigate the mechanism through which religiosity creates these results, Gruber suggests four possibilities: that religious attendance increases the number of social interactions in a way peculiar to religious settings; that religious institutions provide financial and emotional "insurance" that help people mitigate their losses when setbacks occur; that attendance at religious schools may be an advantage; and, finally, that religious faith may simply improve well-being directly by enabling the faithful to be "less stressed out" by the problems of every day life.