Hedging by Giving: Spiritual Insurance and Religious Donations

Yu-Jane Liu, Juanjuan Meng, Dalin Sheng, Guangxin Yang, and Yu Zhang

♦ We investigate “spiritual insurance” — a mental strategy for coping with risk, where individuals engage in good deeds, including donations, in exchange for perceived blessings and protection. Using bank transactional data, we show that higher income uncertainty and health shocks lead to increased donations, particularly to religious charities. Moreover, individuals who donate to religious charities tend to reduce insurance expenditures. In a field experiment on millions of potential donors through an online platform, we find that spiritual insurance narratives increase giving, providing direct causal evidence for such a motive. Our findings provide new evidence on how spiritual insurance affects household risk-coping behavior.

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