68 Pages Posted: 6 Dec 2016
Date Written: December 6, 2016
We analyze the role of people’s beliefs about the rich in the determination of public policy in the context of a randomized online survey experiment. A question we study is the desirability of government-private sector meetings, a variable we argue is connected to State capacity. Survey respondents primed with negative views about business leaders want fewer meetings, as well as higher taxes to the top 1% and more regulation. We also study how these effects change when subjects are (additionally) primed with positive/negative views about government officials. Distrust in the government increases the preferred tax rate on the top 1% only when business legitimacy is low. A model with multiple equilibria helps interpret these findings. In one of the equilibria, meetings are allowed, business legitimacy is high, and people set a low income tax rate for businesspeople. In the other, meetings are forbidden, business legitimacy is low, and people set high taxes to punish the businesspeople for their corrupt behavior.
Keywords: Business Legitimacy, State Capacity, Meetings, Taxes, Top 1%, Regulation.
Suggested Citation: Suggested Citation
Di Tella, Rafael and Dubra, Juan and Lagomarsino, Alejandro, Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation (December 6, 2016). Harvard Business School BGIE Unit Working Paper No. 17-046. Available at SSRN: https://ssrn.com/abstract=2881496