Location of Repository

Reestablishing the income-democracy nexus

By Jess Benhabib, Alejandro Corvalan and Mark M. Spiegel


A number of recent empirical studies have cast doubt on the "modernization theory" of democratization, which posits that increases in income are conducive to increases in democracy levels. This doubt stems mainly from the fact that while a strong positive correlation exists between income and democracy levels, the relationship disappears when one controls for country fixed effects. This raises the possibility that the correlation in the data reflects a third causal characteristic, such as institutional quality. In this paper, we reexamine the robustness of the income-democracy relationship. We extend the research on this topic in two dimensions: first, we make use of newer income data, which allows for the construction of larger samples with more within-country observations. Second, we concentrate on panel estimation methods that explicitly allow for the fact that the primary measures of democracy are censored with substantial mass at the boundaries, or binary censored variables. Our results show that when one uses both the new income data available and a properly non linear estimator, a statistically significant positive income-democracy relationship is robust to the inclusion of country fixed effects.Income

OAI identifier:

Suggested articles



  1. (2001). A Complete Data Set of Political Regimes,
  2. (2000). A New Dataset for Measuring Democracy, 1810-1998.”
  3. A.Subramanian and F.Trebbi (2004), “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development”
  4. (1980). Analysis of covariance with qualitative data”,
  5. and E.Kyriazidou (2000) “Panel Data Discrete Choice Models with Lagged Dependent Variable”,
  6. (1980). and T.E.MacCurdy
  7. (2004). Bias Reduction for Dynamic Nonlinear Panel Models with Fixed Effects,
  8. (2002). Conceptualizing and Measuring Democracy: Evaluating Alternative Indices,”
  9. (1996). Conflict and Growth,
  10. (1998). Cross-National Indicators of Liberal Democracy, 1950-1990”, ICPSR 2532,
  11. (1998). Did Real World Per Capita Income Really Grow Faster in 1870-1913 Than
  12. (1996). Does High Income Promote Democracy?" World Politics,
  13. (2001). Does Oil Hinder Democracy?”,
  14. (1996). F.Limongi and A.Przeworski
  15. (2009). Fixed Effects Estimation of Structural Parameters and Marginal Effects in Panel Probit Models,”
  16. (2000). Gradations of Democracy? Empirical Tests of Alternative Conceptualizations”,
  17. (2009). Is Newer Better? Penn World Table Revisions and Their Impact on Growth Estimates,”
  18. (1997). Modernization: Theories and Facts”, World Politics
  19. (2008). On the Distribution of Education and
  20. (1993). Orthogonality Conditions for Tobit Models with Fixed Effects and Lagged Dependent Variables”,
  21. (2002). Penn World Table Version 6.1,” Center for International Comparisons of Production, Income, and Prices at the
  22. (2007). Polity IV project:
  23. (1959). Some Social Requisites of Democracy:
  24. (1981). The incidental parameters problem and the problem of initial conditions in estimating a discrete time-discrete data stochastic process”,
  25. (2006). The Political Economy of Redistribution under Democracy,"
  26. (2003). The World Economy: Historical Statistics,
  27. (2003). Tropics, Germs and Crops: How Endowments Influence Economic Development”,
  28. (2008). Two Persistent Dimensions of Democracy: Contestation and Inclusiveness,”

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.