The Religious Transition. A Long-run Perspective.

We use the largest common factor in 14 items reported in the World Values Surveys as a robust measure of religiosity. This measure is held to identify the importance of religion in all aspects of people's life. The level of religiosity differs by about 50 percentage points between rich and poor countries. We interpret the change in religiosity in terms of demand and supply. Most components of the demand for religion are reduced by rising levels of per capita income. Rising per capita income also reduces the role of religious institutions as suppliers of core collective goods. Aspects of demand and supply are integrated in a CES production function framework that explains the direction of causality in the observed negative correlation between the level of per capita income and religiosity.