| Abstract: |
This paper studies the relationship between people's beliefs about the quality
of their institutions, as measured by corruption perceptions, and preferences
for redistribution in Latin America. Our empirical study is guided by a
theoretical model which introduces taxes into Foellmi and Oechslin's (2007)
general equilibrium model of non-collusive corruption. In this model perceived
corruption influences people's preferences for redistribution through two
channels. On the one hand it undermines trust in government, which reduces
people's support for redistribution. On the other hand, more corruption
decreases own wealth relative to average wealth of below-average-wealth
individuals leading to a higher demand for redistribution. Thus, the effect of
perceived corruption on redistribution cannot be signed a priori. Our novel
empirical findings for Latin America suggest that perceiving corruption in the
public sector increases people's support for redistribution. Although the
positive channel dominates in the data, we also find evidence for the negative
channel from corruption to demand for redistribution via reduced trust. |