In The Wealth of Nations, Adam Smith argued that state regulation of religion inevitably results in political favoritism toward the religious allies of the ruling class, producing corruption as interest groups seek special favors and tax monies. Disfavored religious groups pay enforcement authorities bribes to look the other way. A new study led by Boston University law professor Keith Hylton suggests Smith was right.
The study, published in the summer 2011 issue of American Law and Economics Review, finds that bans or restrictions on specific religions correlate strongly with corruption as measured by the nongovernmental organization Transparency International. Its Corruption Perceptions Index measures the degree of corruption among public officials based on surveys of business people and analysts.
Higher levels of corruption, in turn, reduce economic growth. Hylton and his colleagues conclude that "laws burdening religion reduce economic growth and are positively associated with inequality."