The importance of brand and competition in defining U.S. religious markets.

1. Introduction

Over the past 40 years, economists have vastly expanded their study of behavior in markets where there is no explicit trade of goods or services. One of the most fundamental and ubiquitous of these markets is that of religious behavior, where economists and other social scientists have explored a variety of influences on religious participation. At the outset of this research program, economic models of religious choice borrowed from long-used choice-theoretic concepts such as the law of demand or the cost of time. More recent contributions have included household production models taking account of human capital or the role of market-level forces, particularly religious competition. Prior empirical research has resulted in the identification of a variety of determinants of religious participation. These include income, education, race, and the degree of monopolization or competitiveness in the religious market.

As the empirical application and testing of these models has proceeded, researchers have been aware of problems in measuring various aspects of religious choice such as religious participation or "religiosity." At the most general level, religiosity may imply a difference in a secular versus religious worldview. At the level of actual observation, it often measures how frequently one attends church. While some of the basic measurement issues related to religious choice and behavior may be beyond the power of researchers to investigate, one important aspect is not but has largely been overlooked, that is, the type or brand of religious choice. By and large, empirical research has skirted this important definitional issue and treated different types or brands of religious choice much like one would treat different brands of carbonated soft drinks. Using such a broad, homogeneous definition of the religious product implicitly assumes that economic and demographic characteristics exert similar influences on different types or "brands" of religious participation and, thereby, assumes that such branding is not of empirical significance in defining religious markets and behavior within them. (1) Moreover, some tension has existed in prior empirical work as to whether religious competition is an exogenous factor--the common assumption--or whether it helps to define the choice variable. (2)

Our central question is whether the same processes are driving religiosity across brands. We ask, do consumers of religion respond differently to key economic variables such as income, religious competition, or other factors based on the brand of religion being consumed? Likewise, do some economic variables exert their influence independently of brand? An important part of our investigation centers on how to measure brand. We first rely on two indicators of brand: broad denominational categories and intensity of participation in religious activity. The denominational categories are mainline Protestant, evangelical Protestant, and Catholic. The intensity breakdown is based on geographic regions of low, moderate, and high religious participation. In addition, we also examine whether the degree of religious competition itself helps to define brand.

In the next section, we develop theoretical explanations for variation in overall religious participation as well as by brand and discuss prior empirical work in this area. The third section contains the data description and our empirical framework for explaining religious participation. In the fourth section, we estimate the empirical model using both the denominational and intensity brand indicators. In the final section, we condense and summarize the key findings.

2. Theoretical and Empirical Background

Analytical study of religious choice from an economic viewpoint dates at least to Adam Smith, who drew attention to the importance of competition and monopolization on religious choice. (3) In more recent times, household production models have become the theoretical standard. Azzi and Ehrenberg (1975) link age with religious participation using a household production model with a lifetime budget constraint. Iannocone (1984, 1990) and Neuman (1986) have developed consumption capital models of religion, building on the work of Stigler and Becker (1977). Iannocone (1998) summarizes these theoretical models. An adapted version of this is given in Equation 1:

[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]. (1)

Here, utility for consumer j is determined by consumption of i different generic, secular Z-goods and afterlife consumption, [A.sub.j], and is subject to the traditional time and budget constraints, T and Y. The Z-goods are produced by consumers combining time, [T.sub.i], in the production process with market goods, [X.sub.i]. Afterlife consumption for consumer j is produced by k different religious activities, [R.sub.k], and these activities are produced by combining time; market goods; human capital specific to the activity, [S.sub.k]; and quality of associations in a particular religious group noted by [Q.sub.m]. Religious human capital is a function of both an initial endowment of capital, [S.sub.k0], and investment into human capital, [DELTA][S.sub.kt].

In this framework, human capital and investments in it become important influences on choice. What economists refer to as human capital is similar to what many other social scientists would call cultural influences--the set of values, beliefs, rituals, and related matters making up the environment in a society. The approach described in Equation 1 provides economists with theoretic models in which these "cultural" forces become more than merely exogenous forces. (4) For example, endogenous life cycle changes in depreciation rates or time horizons can influence choice. Exogenous endowments of inputs such as doctrine, practice, or networks of relationships inherited from family and other external sources matter. Capital stocks can also be built by endogenous investments in doctrines, practice, and relationships. Along with capital stocks themselves, goods, services (both traded and nontraded), and institutions that are complementary to the utilization of the stocks will also influence choices.

At a general functional level, Equation 2 summarizes the reduced-form model for participation ([R.sub.k]) that lies behind most of the econometric studies of religious choice:

Participation = f(Income - Wealth; Religious Competition; Human Capital). (2)

Barro and McCleary (2003) found cross-country evidence that religious participation increases with income levels. Iannacone (1992, 1995) finds income and wealth negatively related to "fundamentalism"-sectarianism and positively related to mainline or less strict portfolio diversification. Lipford and Tollison (2003) find income and participation inversely related in a simultaneous model. (5)

Finke and Stark (1988); Iannacone (1991); Lipford, McCormick, and Tollison (1993); Zaleski and Zech (1995); and others have found supporting evidence that higher levels of competition promote more religious participation. (6) Hull and Bold (1998) find a negative relationship between religious product variety and church membership. Ekelund et al. (1996) and Ekelund, Hebert, and Tollison (2002) explored the importance of supply-side, institutional features in a wide-ranging study of medieval Christianity. Barro and McCleary (2005) find a positive association between monopolization (nationalizing) of religious choice and religiosity, but the direction of causation in their study runs from religiosity to monopolization.

The central issue that we address in this article is whether the broad categories of variables described previously (income, market competition, and human capital) would have different effects on different brands of religion. While this issue surfaces in the literature, it has not been systematically explored. Additionally, the relationship between brand choice and religiosity is analogous to the more general relationship between brand and intensity (quantity) of purchase of any product. This relationship has received extensive study from theoretical and econometric perspectives in economics journals as well as by economists in marketing journals, starting with McFadden (1980, 1986). (7) This literature has demonstrated that empirical models that estimate a single equation for intensity or quantity of purchase are misspecified. Instead, either intensity equations for each brand should be estimated separately or a multiequation system for brand and intensity, if identifiable, should be estimated.

The implications of the brand choice-theoretic literature applied to the previously mentioned religious choice framework leads to an extension of the model in Equation 1 as described in Equation 3:

[Q.sub.m] = f([Q.sup.a.sub.m]; [C.sup.a.sub.j])

[R.sub.k] = R([T.sub.kt], [X.sub.kt], [S.sub.kt], [Prob[[Q.sub.m]]), (3)

where [Q.sup.a.sub.m] is a vector of attributes for group m and [C.sup.a.sub.j] is a vector of attributes for consumer j. Religious association (brand) is no longer an exogenous influence on religious activity. Instead, brand choice is determined by attributes of the brand and characteristics of the consumer, and the likelihood of choice of brand m enters the religious activity production function.