Why doesn’t capitalism flow to poor countries?

Why isn’t 30 percent of the economics profession working on this problem?  Di Tella and MacCulloch tell us the following:

We find anecdotal evidence suggesting that governments in poor
countries have a more left wing rhetoric than those in OECD countries. 
Thus, it appears that capitalist rhetoric doesn’t flow to poor
countries.  A possible explanation is that corruption, which is more
widespread in poor countries, reduces more the electoral appeal of
capitalism than that of socialism.  The empirical pattern of beliefs
within countries is consistent with this explanation: people who
perceive corruption to be high in their country are also more likely to
lean left ideologically (and to declare support for a more intrusive
government in economic matters).  Finally, we present a model explaining
the corruption-left connection.  It exploits the fact that an act of
corruption is more revealing about the fairness type of a rich
capitalist than of a poor bureaucrat.  After observing corruption,
voters who care about fairness react by increasing taxes and moving
left.  There is a negative ideological externality since the existence
of corrupt entrepreneurs hurts good entrepreneurs by reducing the
electoral appeal of capitalism.

Here is the paper.  Here are non-gated versions.


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