This study investigates how religion influences particularized and generalized trust, as well as inter-group discrimination and tolerance. I combine the individual-level data of the latest round of the Indonesian Family Life Survey with the national census and other nationally representative datasets to examine two sources of variation through which religion may influence these attitudes, to wit, individual religiosity and the community’s religious composition. Religiosity is positively associated with particularized trust and in-group preference, and negatively with religious tolerance. The strengths of the associations between measures of in-group preference (including political preference) and individual religiosity are much stronger than those from gender, education, or per-capita expenditure; they are also strongest among Muslims, the dominant majority in Indonesia. These associations are robust to various identification strategies. Using selection on observables to benchmark the potential bias from selection on unobservables into different levels of religiosity, I find that the selection on unobservables need to be at least three times stronger than that on observables to explain away these results.
Meanwhile, consistent with previous empirical studies in economics and political science, I find that individuals are more cooperative and trusting of their community members in more religiously homogeneous communities. At the same time – and in support of the optimal contact hypothesis of Allport (1954) – individuals in more homogeneous communities to be more discriminative against and less tolerant of members of the religious out-groups. Importantly, segregation matters and its omission can bias the coefficient on diversity. Its coefficients are often significant and their signs are often
opposite those of religious diversity.