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Invisible Hands of Gods: How Religion Improves Economic Decion-Making and Outcomes

Project description

Exploring how religion influences economic decisions in Africa

Religion is a major part of life in Africa, especially in Ghana, where 96 % see it as vital to daily life. Households spend 15-20 % of their budgets on religious activities, more than on clothing or education. The project posits that religion can help individuals overcome psychological barriers, leading to better life decisions, such as taking loans for business expansion. The ERC-funded INVISIGODS project will assess whether emotions and psychology influence the demand for religious messages. The project will analyse 10 years of sermon texts, along with geocoded data on church branches, to determine whether churches compete with one another for members through secular interactions. Additionally, it will conduct a randomised control trial to investigate how receiving a prophecy impacts the profits of business owners.

Objective

Religion is big business in Africa. Religion is also poorly understood business. Almost 96% of Ghanaians agree with the statement “religion is important to my daily life”. They put their money where their mouths are. Expenditure surveys show that households spend 15-20% of their budgets on religious activities—more than is spent on clothes, school, or entertainment. What are they paying for? I hypothesize that individuals use religion as a tool to relax psychological constraints. Religion makes it easier for individuals to produce useful, if not necessarily correct, beliefs about themselves or their actions. For example, they may take out a loan to expand a business because they overestimate the returns to effort. Religious organizations also put members in touch with one another and these interactions may make the beliefs true. For example, co-religionists may patronize their fellow member’s newly expanded business, increasing the chances that the business will be a success. In this way, religion relaxes psychological constraints (low confidence in the example) and improves economic outcomes (business profits in the example). I test this hypothesis across three work packages measuring whether the demand for religious messages responds to their psychological usefulness; using text analysis on 10 years of sermons and geo-coded data on church branches to test whether churches compete with one another by attracting members for secular interactions; and conducting a randomized control trial to understand how receiving a prophecy affects business owner’s profits.

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(opens in new window) ERC-2025-STG

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Host institution

UNIVERSITE CATHOLIQUE DE LOUVAIN
Net EU contribution

Net EU financial contribution. The sum of money that the participant receives, deducted by the EU contribution to its linked third party. It considers the distribution of the EU financial contribution between direct beneficiaries of the project and other types of participants, like third-party participants.

€ 1 479 448,00
Address
PLACE DE L UNIVERSITE 1
1348 LOUVAIN LA NEUVE
Belgium

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Region
Région wallonne Prov. Brabant Wallon Arr. Nivelles
Activity type
Higher or Secondary Education Establishments
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Total cost

The total costs incurred by this organisation to participate in the project, including direct and indirect costs. This amount is a subset of the overall project budget.

€ 1 479 448,00

Beneficiaries (1)

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