The role of effective governance in determining the relationship between Muslims’ religiosity and their income

Abstract

Most of the studies which examine the effect of religiosity on income in the literature have found the relationship to be negative among Muslims and non-Muslims. The waves of migration of religious Muslims to non-Muslim majority countries have raised concerns about the future of the economic growth of such hosting countries. This paper introduces the government as a variable that interacts with religiosity and explains this complex link. In this study, we use panel data from the World Values Survey and the World Bank Governance Indicators for 68 countries over 14 different years from 1996 to 2014 to test how governance explain the religiosity-income link among Muslims. The study found evidence that countries with higher government effectiveness levels experience a lower negative impact of religiosity on income. Results show that the negative size shrinks with better governance until it becomes statistically insignificant when countries are at a very high government effectiveness level.