The Lipset Hypothesis in a Property Rights Perspective

Abstract

According to the so-called Lipset hypothesis, economic development – a growing income and a growing level of education – creates the “social requisites” for democratic institutions. This proposition receives much support in the contemporary economic literature. This paper addresses a question that seems to be unresolved in this literature: which institutions are shaped by economic development and which are not? The paper starts from a general notion of property rights and makes a distinction between the scope of property rights, and their enforcement level. The main argument is that these two dimensions of property rights are related differently to economic development because of culture and because of the potential to catch up through imitation. This prediction is tested with cross-country regressions on a measure of the scope and enforcement of property rights, and with logit regressions on the events of democratization.