Happiness, religiosity and rationality: going deeper into the utility function

Abstract The paper tests the nexus between religiosity and subjective wellbeing on eight waves of the European Social Survey covering 30 countries and 267 regions. It finds that high levels of self-declared religiosity, frequency of prayer and religious attendance are associated with significantly higher life satisfaction versus the omitted benchmark of non-religious, non-attending, non-praying individuals, while this is not the case for individuals declaring low levels of self-declared religiosity that are significantly less satisfied than the non-religious. Results are robust across waves, countries, gender, age, education and income splits. The paper outlines research hypotheses on transmission mechanisms and finds empirical support for six channels accounting for this nexus (higher sense of life, reduced impact of negative shocks and of being at the bottom of social ladder, higher frequency of relational goods, attendance premium, positive social externality). Empirical evidence on the last transmission channel shows that mean region/wave religiosity positively affects subjective wellbeing of local non-believers. Empirical findings do not reject the hypothesis that the utility function should be augmented with religious preferences to explain anomalies in consumption/saving and work/leisure choices that standard utility functions cannot explain.