Violence and Business Interest in Social Welfare: Evidence from Mexico

Abstract

Countries in the Global South are particularly vulnerable to social and political violence. This paper suggests that such violence makes certain recalcitrant economic interests more open to taxes and spending on social welfare. Using results from a survey experiment of business owners and operators in Mexico, we show that relative to more innocuous institutional weaknesses, concerns over violence generally increase support for anti-poverty spending and decrease support for tax cuts. To build a theory, we explore heterogeneous effects and textual data. The findings suggest that business interests see anti-poverty spending as a tool for shoring up costs of violence in consumer markets, with some leaders even extending support to welfare-enhancing taxes. However, violence can create challenges in labor markets that increase operational costs, leading some business interests to resist tax policies that ask them to help fund social programs.