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  • 2016
  • Working Paper
  • HBS Working Paper Series

Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation

By: Rafael Di Tella, Juan Dubra and Alejandro Lagomarsino
  • Format:Print
  • | Language:English
  • | Pages:68
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Abstract

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 for 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; Prejudice and Bias; Values and Beliefs; Taxation; Business and Government Relations

Citation

Di Tella, Rafael, Juan Dubra, and Alejandro Lagomarsino. "Meet the Oligarchs: Business Legitimacy, State Capacity and Taxation." Harvard Business School Working Paper, No. 17-046, December 2016.
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About The Author

Rafael M. Di Tella

Business, Government and the International Economy
→More Publications

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More from the Authors
  • Causal Inference During A Pandemic: Evidence on the Effectiveness of Nebulized Ibuprofen as an Unproven Treatment for COVID-19 in Argentina By: Sebastian Calonico, Rafael Di Tella and Juan Cruz Lopez Del Valle
  • Does Social Media Cause Polarization? Evidence from Access to Twitter Echo Chambers during the 2019 Argentine Presidential Debate By: Rafael Di Tella, Ramiro H. Gálvez and Ernesto Schargrodsky
  • The 2012 Spanish Labor Reform: Lifting All Boats or Levelling Down? By: Vincent Pons, Rafael Di Tella, Santiago Botella and Elena Corsi
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