Churches provide community services similar to those provided by the government. However, economic research has not attempted to relate church activity to government activity. This dissertation considers that important issue. The first paper of the dissertation hypothesizes that churches can substitute for the government and tests this hypothesis by using a new panel data set of Presbyterian Church (USA) congregations from 1994 to 2000. This data set is used to estimate equations describing both church-member donations and a church's community spending as dependant on a number of variables including government welfare expenditures. The paper exploits a provision in the 1996 welfare law which decreased the availability and use of welfare services for immigrants to identify the causal affect of government spending on church activity. The results show that church activities substitute for government activities. An increase of one dollar in Food Stamps spending leads to a decrease in church spending of between 50 cents and one dollar. These results are robust to a number of specifications.

Subsequent chapters in the dissertation will investigate the relationship between church and state by looking at how churches were affected by the creation of major federal welfare programs including cash welfare, Old Age Assistance (now Supplemental Security Income), Medicaid, and Food Stamps. These chapters will utilize a new, historical, multi-denominational dataset including information on most of the major Protestant faiths; the data will cover the present period back to 1930. These chapters will investigate the extent to which churches have been “crowded out” of communities as social services providers; such an investigation may help explain a number of puzzling phenomena concerning historical church activity in the United States.