Economic Determinants of Democracy

Abstract

The relationship between the level of economic development and the level of democracy found in most quantitative cross-national research implies that the largest gains in democracy are experienced by countries at intermediate levels of development. During the 1960s and 1970s, however, middle-income countries were more likely to register declines in democracy than increases. I explain this anomaly with the hypothesis that income inequality affects democracy, and this effect often counteracts the positive influence of economic development. Because intermediate levels of economic development are associated with the highest levels of income inequality, the independent negative effect of income inequality on change in level of democracy explains the declines in democracy in middle-income countries. Cross-national data from a sample of 58 countries support the hypothesis of a negative effect of income inequality on change in level of democracy from 1965 to 1980. This effect is robust when noneconomic determinants of democracy are taken into account and when sample size is increased.