Perception of corruption and public support for redistribution in Latin America

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 wealth channel dominates in the data, we also find evidence for the trust channel — from corruption to demand for redistribution via reduced trust.Xavier Ramos acknowledges financial support of projects PID2019-104619RB-C43 (Ministerio de Ciencia e Innovación, Spain) and 2017SGR-1571 (Generalitat de Catalunya, Spain). Esther Hauk acknowledges financial support from the Spanish Agencia Estatal de Investigación (AEI), through the Severo Ochoa Programme for Centers of Excellence in R&D (Barcelona School of Economics CEX2019-000915-S), and through CICYT project number ECO2015-67171-P (MINECO/FEDER), and from the Spanish Ministry of Science, Innovation and Universities through project PGC2018-097898-B-100 MCIU/AEI/FEDER and from the government of Catalonia under project 2017SGR1571.Peer reviewe