TY - JOUR

T1 - Reconsidering the modernization hypothesis: The role of diversified production and interest-group competition

AU - Pittaluga, Giovanni B.

AU - Reghezza, Alessio

AU - Seghezza, Elena

PY - 2020/12

Y1 - 2020/12

N2 - The modernization hypothesis attributes democracy to higher incomes. The hypothesis has been controversial with claims of no relationship or opposite causality. Using data on a large sample of countries over the period from 1995 to 2015, we show empirically that the hypothesis is valid by studying the role of diversified production and interest-group competition. Production diversification increases incomes and is associated with emergence of competing organized interest groups representing the different diversified sectors. The interest-group competition underlies democracy by restraining rent seeking for benefits that would otherwise be sought through single-decision-maker authoritarian government.

AB - The modernization hypothesis attributes democracy to higher incomes. The hypothesis has been controversial with claims of no relationship or opposite causality. Using data on a large sample of countries over the period from 1995 to 2015, we show empirically that the hypothesis is valid by studying the role of diversified production and interest-group competition. Production diversification increases incomes and is associated with emergence of competing organized interest groups representing the different diversified sectors. The interest-group competition underlies democracy by restraining rent seeking for benefits that would otherwise be sought through single-decision-maker authoritarian government.

KW - Interest groups

KW - Modernization

KW - Production diversification

U2 - 10.1016/j.ejpoleco.2020.101929

DO - 10.1016/j.ejpoleco.2020.101929

M3 - Article

VL - 65

JO - European Journal of Political Economy

JF - European Journal of Political Economy

SN - 0176-2680

M1 - 101929

ER -