Problems With Tithing
An Los Angeles Times article reported on the difficulties of religious organizations in the recession. Contributions are down, and an unusually large number of religious-based schools have closed.
My initial thought was that those religious organizations that encourage tithing would have fewer problems; but a bit more reflection might suggest the opposite.
If every member of a religious group always tithed, the income elasticity of demand for religion would be plus-one. So while tithers donate a large share of their income, the organization’s finances will vary perfectly with the state of members’ incomes; those organizations are by no means immune to macroeconomic fluctuations. There is even some evidence (Dahl and Ransom, American Economic Review, 1999) that suggests that even in tithing religions, in bad times the likelihood of tithing decreases and the income elasticity exceeds one.