Income and Democracy: Lipset's Law Revisited

27 Pages Posted: 28 Feb 2013

See all articles by Anke Hoeffler

Anke Hoeffler

University of Oxford - Centre for the Study of African Economies (CSAE)

Robert Bates

Harvard University - Department of Government

Ghada Fayad

International Monetary Fund (IMF)

Date Written: December 2012

Abstract

We revisit Lipset's law, which posits a positive and significant relationship between income and democracy. Using dynamic and heterogeneous panel data estimation techniques, we find a significant and negative relationship between income and democracy: higher/lower incomes per capita hinder/trigger democratization. Decomposing overall income per capita into its resource and non-resource components, we find that the coefficient on the latter is positive and significant while that on the former is significant but negative, indicating that the role of resource income is central to the result.

Keywords: Development, Economic models, Income, Political economy, cross-section dependence, democracy, dynamic panel data, parameter heterogeneity

JEL Classification: C23, O11, O17, O55

Suggested Citation

Hoeffler, Anke and Bates, Robert and Fayad, Ghada, Income and Democracy: Lipset's Law Revisited (December 2012). IMF Working Paper No. 12/295. Available at SSRN: https://ssrn.com/abstract=2226220

Anke Hoeffler (Contact Author)

University of Oxford - Centre for the Study of African Economies (CSAE) ( email )

Oxford OX1 3UL
United Kingdom
+44 1865 274 554 (Phone)
+44 1865 274 558 (Fax)

Robert Bates

Harvard University - Department of Government ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States
617-496-0919 (Phone)
617-496-6849 (Fax)

Ghada Fayad

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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