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Why doesn't Capitalism flow to Poor Countries?

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  • Rafael Di Tella

    (Harvard Business School)

  • Robert MacCulloch

    (Princeton University)

Abstract

We find evidence consistent with the hypothesis that governments in poor countries have a more left wing rhetoric than those in OECD countries. A possible explanation is that corruption, which is more widespread in poor countries, reduces the electoral appeal of capitalism more than that of socialism. The empirical pattern of beliefs within countries is consistent with this explanation: people who perceive corruption to be high in the country are also more likely to lean left ideologically and to declare to support a more intrusive government in economic matters. Finally, we show that the corruption-left connection can be explained if corruption is seen as unfair behavior on the part of capitalists. Voters then react by moving left, even if this is materially costly to them. There is a negative ideological externality since the existence of corrupt entrepreneurs hurts good entrepreneurs by reducing the general appeal of capitalism.

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File URL: http://128.118.178.162/eps/othr/papers/0404/0404005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Others with number 0404005.

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Length: 42 pages
Date of creation: 12 Apr 2004
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Handle: RePEc:wpa:wuwpot:0404005

Note: Type of Document - pdf; pages: 42
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Web page: http://128.118.178.162

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Keywords: beliefs; corruption; fairness; legitimacy; ideological externality.;

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