Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation
Rafael Di Tella
Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)
University of Montevideo - Department of Economics
December 6, 2016
Harvard Business School BGIE Unit Working Paper No. 17-046
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.
Number of Pages in PDF File: 68
Keywords: Business Legitimacy, State Capacity, Meetings, Taxes, Top 1%, Regulation.
Date posted: December 6, 2016