PLEASE NOTE DAY AND TIME OF WORKSHOP
University of Toronto, Faculty of Law
LAW & ECONOMICS WORKSHOP SERIES
presents
Rafael Di Tella
Harvard Business School
Why Doesn’t Capitalism Flow to Poor Countries?
Thursday, March 5, 2009
4:10 - 6:00
Solarium (room FA2) - Falconer Hall
84 Queens Park
Abstract:
We show that capitalism is not common around the world. Outside the US and a small group of rich countries, regulations, leftist rhetoric and interventionist beliefs flourish. We argue that the lack of capitalism is connected to the presence of corruption. For example, we find that within a country, people who perceive more corruption are more likely to favour regulations, government ownership of business and to self-place on the left of the ideological spectrum. As the level of regulation is held constant within a country, this finding is inconsistent with a theory that assumes the only channel connecting these two variables is one where regulation causes corruption. We present a model where corruption reduces the demand for capitalism. This occurs because corrupt capitalists are disliked and voting for left wing policies is a form of punishment that is available to voters (even when the judicial system is weak). Evidence on emotions supports this explanation: the frequency with which people report experiencing anger is positively correlated with the perceived amount of corruption, but this correlation is significantly weakened when business is heavily regulated.
Refreshments will be served.
For more workshop information, please contact Nadia Gulezko at n.gulezko@utoronto.ca
