The Impact of Inflation on Individual Religiosity: An Econometric Analysis of Religious Behavior Within the Framework of Islamic Economics in Iran

Shahsavary, Sajjad; Pourfaraj, Alireza

doi:10.22054/ijer.2026.90099.1431

The Impact of Inflation on Individual Religiosity: An Econometric Analysis of Religious Behavior Within the Framework of Islamic Economics in Iran

Document Type : Research Paper

Authors

Sajjad Shahsavary ¹

Alireza Pourfaraj ²

¹ Ph.D. Candidate in Economics, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran.

² Professor and Faculty Member, Faculty of Economics and Administrative Sciences, University of Mazandaran, Babolsar, Iran

https://doi.org/10.22054/ijer.2026.90099.1431

Abstract

The present study quantitatively examined the conditional association between inflation and individual religiosity within the framework of Islamic economics, testing the hypothesis that economic instability erodes spiritual capital. Using survey data collected from 300 households in 2025 (1404 in the Iranian calendar), the study operationalized religiosity through a standardized instrument based on Glock and Stark’s five-dimensional model. A probit model was estimated, while controlling for socioeconomic factors. The findings revealed a statistically significant negative association between inflation and religiosity: a one-percentage-point increase in inflation was associated with a 28.2% decrease in the predicted probability of religiosity, based on the marginal effect evaluated at the means. However, limited variation in inflation constrained causal identification. By contrast, education and income exhibited positive and statistically significant associations with religiosity. These findings can provide empirical support for the central premise of Islamic economics that macroeconomic instability may erode a community’s intangible spiritual assets, implying that inflation control could be framed not only as an economic objective but also as a cultural and religious priority in public policy.
Introduction
Inflation, as a major macroeconomic phenomenon, has far-reaching implications for various aspects of individual and social life. Although its economic consequences have been extensively studied, its non-economic effects—particularly on religious beliefs, attitudes, and practices—remain relatively underexplored. This study sought to address this gap by examining the relationship between inflation and individual religiosity in Iran.
Within the framework of Islamic economics, inflation is viewed not merely as a fluctuation in the general price level but also as a phenomenon potentially associated with practices that contravene Islamic principles, including hoarding, extravagance, usury, and disruptions in the balance between supply and demand. From an Islamic perspective, inflation may undermine social justice, exacerbate socioeconomic inequalities, and weaken social capital, including trust and solidarity. Religiosity, in turn, is a multidimensional phenomenon that extends beyond individual beliefs and may also be shaped by objective socioeconomic circumstances and the broader environment.
Despite extensive scholarship on Islamic economics and the economics of religion, three important gaps remain. First, the theoretical understanding of how inflation may influence psychosocial outcomes, particularly religiosity, remains underdeveloped. Second, empirical research has focused primarily on income and broader economic shocks, with comparatively limited attention to inflation as a distinct explanatory factor. Third, empirical evidence on this relationship in the Iranian context remains scarce. To address these gaps, the present study aimed to examine the impact of inflation on individual religiosity within the framework of Islamic economics in Iran. Measuring religiosity along five dimensions, the study focused on its relationship with inflation, as the key independent variable, by drawing on micro-level survey data from Iran. The research questions are as follows: (1) Is inflation, as a macroeconomic indicator of economic instability, significantly and negatively associated with individual religiosity in Iran? And (2) through what mechanisms might inflation influence individual religiosity within the framework of Islamic economics?
Materials and Methods
This study adopted an explanatory research design to examine the direction and magnitude of the relationship between inflation and religiosity. The data was collected through a survey of 300 households in Tehran and Kashan in 2025 (1404 in the Iranian calendar). The initial sample size was 384, as calculated using Cochran’s formula. However, due to practical limitations, 300 completed questionnaires were ultimately included in the analysis. Moreover, convenience sampling was used to recruit participants.
The dependent variable (i.e., religiosity) was measured using a standardized instrument based on Glock and Stark’s five-dimensional model of religiosity. The instrument proved to be reliable, with a Cronbach’s alpha coefficient of 0.87. The independent variable was the annual inflation rate in the province where each respondent resided, obtained from the Central Bank of Iran. The analysis controlled for income, education, occupation, age, and city of residence.
A probit model was employed for estimation, and marginal effects were calculated to facilitate the interpretation of the results. The study acknowledged that the cross-sectional nature of the data would limit causal identification. Accordingly, the findings were interpreted as conditional associations rather than definitive causal effects, with their interpretation informed by the relevant theoretical framework. The adequacy of the sample size was further assessed using the events-per-variable (EPV) criterion. With 150 events and six predictors, the EPV was 25, exceeding the commonly recommended minimum of 10.
Results and Discussion
The probit model results revealed a negative and statistically significant association between inflation and the probability of being religious (coefficient = −74.603, SE = 7.296, p < 0.001). The marginal effects indicated that a one-percentage-point increase in inflation was associated with a 28.2% decrease in the predicted probability of being religious, evaluated at the mean values of the covariates. Education (marginal effect = 0.1096, p < 0.001) and income (marginal effect = 0.0078, p = 0.058) had positive associations with religiosity, while occupation, age, and city of residence were not statistically significant.
The model demonstrated a good fit (McFadden R² = 0.409, LR statistic = 163.111, p < 0.001). Moreover, robustness checks using alternative specifications—including a logit model, a logarithmic inflation, outlier exclusion, and interaction terms—confirmed the stability of the main finding. The results were consistent with the literature on the economics of religion, particularly rational choice theory and the concept of religious capital.
Conclusion
The study concludes that inflation may undermine individual religiosity through both opportunity-cost and meaning-making mechanisms. The policy implications include recognizing the potential cultural and religious consequences of inflation when designing economic policies, developing targeted support packages, promoting moderation, and considering the broader non-economic consequences of economic policies. However, the study had limitations due its cross-sectional design, potential endogeneity, convenience sampling, and reliance on official inflation rates rather than perceived inflation. Future research should employ panel data and measures of perceived inflation to better examine the relationship between inflation and religiosity.

Keywords

Inflation

Individual Religiosity

Economics of Religion

Islamic Economics

Probit Model

Subjects

Islamic economy

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