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Diversification and democracy

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  • Ivar Kolstad
  • Arne Wiig

Abstract

Does diversification of an economy improve the chances of democracy? This paper estimates the effect of export diversification on democracy levels, using data from 143 countries. The endogeneity of diversification is addressed by using variability within countries in fertile soil as an instrumental variable, controlling for country size. The results show that diversification has a significant, positive effect on levels of democracy. This suggests that less concentrated economic power in a society leads to more widely distributed political power. The results are robust to alternative measures of diversification and democracy, and to additional covariates. Results are also similar for diversification indices excluding oil, suggesting that the uncovered relationship is not entirely about oil.

Suggested Citation

  • Ivar Kolstad & Arne Wiig, 2014. "Diversification and democracy," CMI Working Papers 9, CMI (Chr. Michelsen Institute), Bergen, Norway.
    • Handle: RePEc:chm:wpaper:wp2014-9
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    Cited by:

    1. Ivar Kolstad & Abel Kinyondo, 2015. "Alternatives to local content," WIDER Working Paper Series 106, World Institute for Development Economic Research (UNU-WIDER).
    2. Lectard, Pauline & Rougier, Eric, 2018. "Can Developing Countries Gain from Defying Comparative Advantage? Distance to Comparative Advantage, Export Diversification and Sophistication, and the Dynamics of Specialization," World Development, Elsevier, vol. 102(C), pages 90-110.
    3. Ben Saad, Myriam & Brahim, Mariem & Schaffar, Alexandra & Guesmi, Khaled & Ben Saad, Rym, 2023. "Economic complexity, diversification and economic development: The strategic factors," Research in International Business and Finance, Elsevier, vol. 64(C).
    4. Brice Kamguia & Sosson Tadadjeu & Clovis Miamo & Henri Njangang, 2022. "Does foreign aid impede economic complexity in developing countries?," International Economics, CEPII research center, issue 169, pages 71-88.
    5. Ivar Kolstad & Abel Kinyondo, 2017. "Alternatives to local content requirements in resource-rich countries," Oxford Development Studies, Taylor & Francis Journals, vol. 45(4), pages 409-423, October.

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    Keywords

    Diversification; concentration; democracy; political economy;
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