Thursday, September 01, 2005

Taking ideology seriously

Rafael DiTella et al. take endogenous beliefs (ideology?) VERY seriously.  Assuming that pro-market beliefs and policies are conducive to growth, their findings are extremely relevant:

First, some micro level evidence:

Property Rights and Beliefs: Evidence from the Allocation of Land Titles to Squatters
Rafael Di Tella, Sebastian Galiani, Ernesto Schargrodsky

The possession of property rights may change the beliefs that people hold. We
study this hypothesis using a natural experiment from a squatter settlement in the
outskirts of Buenos Aires ensuring that the allocation of property rights is
exogenous to the characteristics of the squatters. There are significant differences
in the beliefs that squatters with and without property rights declare to hold.
Property rights make beliefs closer to those that favor the workings of a free
market. Examples include materialist and individualist beliefs (such as the belief
that money is important for happiness or the belief that one can be successful
without the support of a large group). The effects appear large. The value of a
(generated) index of pro market beliefs for squatters without property rights is
78% of that of the general Buenos Aires population. The value for squatters that
receive property rights is 98% of that of the general population. In other words,
giving property rights to squatters causes a change in their beliefs that makes
them indistinguishable from those of the general population, in spite of the
dramatic differences in the lives they lead. Our experiment is less informative as
to the precise way property rights change beliefs, although there is suggestive
evidence of a behavioral channel.

Next, some macro-level evidence:

Why doesn't Capitalism flow to Poor Countries?
Rafael Di Tella and Robert MacCulloch

We find evidence consistent with the hypothesis that governments in poor countries
have a more left wing rhetoric than those in OECD countries. A possible explanation is
that corruption, which is more widespread in poor countries, reduces the electoral
appeal of capitalism more than that of socialism. The empirical pattern of beliefs within
countries is consistent with this explanation: people who perceive corruption to be high
in the country are also more likely to lean left ideologically and to declare to support a
more intrusive government in economic matters. Finally, we show that the corruptionleft
connection can be explained if corruption is seen as unfair behavior on the part of
capitalists (more than of bureaucrats). Voters then react by moving left, even if this is
materially costly to them. There is a negative ideological externality since the existence
of corrupt entrepreneurs hurts good entrepreneurs by reducing the general appeal of

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