2008): ‘Income and democracy

One of the most notable empirical regularities in political economy is the relationship between income per capita and democracy. Today, all OECD countries are democratic, while many of the nondemocracies are in the poor parts of the world, for example sub-Saharan Africa and Southeast Asia. The positive cross-country relationship between income and democracy in the 1990s is depicted in Figure 1, which shows the association between the Freedom House measure of democracy and log income per capita in the 1990s.1 This relationship is not confined solely to a cross-country comparison. Most countries were nondemocratic before the modern growth process took off at the beginning of the nineteenth century. Democratization came together with growth. Robert J. Barro (1999, 160), for example, summarizes this as follows: “Increases in various measures of the standard of living forecast a gradual rise in democracy. In contrast, democracies that arise without prior economic development … tend not to last. ” This statistical association between income and democracy is the cornerstone of the influ-ential modernization theory. Lipset (1959) suggested that democracy was both created and consolidated by a broad process of “modernization ” which involved changes in “the factors of industrialization, urbanization, wealth, and education [which] are so closely interrelated as to 1 Details on various measures of democracy and other variables are provided in Section I. All figures use the three-letter World Bank country codes to identify countries, which are provided in Appendix Table A, except when multiple countries are clustered together. When such clustering happens, countries are grouped together, the averages for the group are plotted in the figure, and the countries in each group are identified in the footnote to the corresponding figure