TY  - JOUR
AU  - Tella,Rafael Di
AU  - MacCulloch,Robert
TI  - Why Doesn't Capitalism Flow to Poor Countries?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13164
PY  - 2007
Y2  - June 2007
UR  - http://www.nber.org/papers/w13164
L1  - http://www.nber.org/papers/w13164.pdf
N1  - Author contact info:
Rafael Di Tella
Harvard Business School
Soldiers Field Rd
Boston, MA 02163
Tel: 617/495-6000
E-Mail: rditella@hbs.edu

Robert MacCulloch
The Business School
Imperial College London
South Kensington Campus
London SW7 2AZ
United Kingdom
Tel: +44 (0)20 7594157
Fax: +44 (0)20 7823 7685
E-Mail: r.macculloch@imperial.ac.uk
AB  - 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.
ER  -