Working Paper: NBER ID: w13164
Authors: Rafael Di Tella; Robert Macculloch
Abstract: We find anecdotal evidence suggesting that governments in poor countries have a more left wing rhetoric than those in OECD countries. Thus, it appears that capitalist rhetoric doesn't flow to poor countries. A possible explanation is that corruption, which is more widespread in poor countries, reduces more the electoral appeal of capitalism than that of socialism. The empirical pattern of beliefs within countries is consistent with this explanation: people who perceive corruption to be high in their country are also more likely to lean left ideologically (and to declare support for a more intrusive government in economic matters). Finally, we present a model explaining the corruption-left connection. It exploits the fact that an act of corruption is more revealing about the fairness type of a rich capitalist than of a poor bureaucrat. After observing corruption, voters who care about fairness react by increasing taxes and moving left. There is a negative ideological externality since the existence of corrupt entrepreneurs hurts good entrepreneurs by reducing the electoral appeal of capitalism.
Keywords: Capitalism; Corruption; Political Ideology; Left-Wing Parties
JEL Codes: E62; K42; P16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Corruption undermines the moral legitimacy of business (M14) | Voters demand more government regulation and intervention (D72) |
| Perception of corruption (H57) | Stronger effect on ideological leanings in poorer countries (F63) |
| Higher levels of perceived corruption (D73) | Leftward shift in political ideology among voters (D72) |
| Individuals who perceive widespread corruption (D73) | Less likely to identify as right-wing (J79) |
| Individuals who perceive widespread corruption (D73) | More likely to support government intervention (H10) |
| Higher corruption levels (H57) | More left-leaning governments (P39) |
| Corruption negatively influences the appeal of capitalism (P18) | Voters favor left-wing parties (D72) |