Oil, Macro Volatility and Crime in the Determination of Beliefs in Venezuela

Abstract

We use data on political beliefs (broadly, left-right position, meritocracy and origins of poverty) to discuss Venezuela’s economic institutions. Our starting point is the large role attributed to beliefs in determining the economic system and the extent of government intervention (see, for example, Alesina et al, 2001). This brings us to the question of what causes changes in beliefs. We briefly discuss and present some evidence consistent with the idea that some of the main social and economic forces that affected Venezuela this century may have changed people’s rational beliefs. These include a dependence on oil, a history of macro-economic volatility, the rise in crime and the rise in a preoccupation with corruption. We end up with a cautionary result: although these results point in the direction of giving a role to real shocks in the determination of beliefs, we test and find that perceptions for different phenomena are sometimes correlated. In particular, the perception of corruption is related to the perception of crime rather than the amount of real corruption actually experienced.

Keywords: beliefs, oil, crime, corruption, macro volatility, perceptions, causality

JEL Classification: P16, E62