TY - JOUR AU - Acemoglu,Daron AU - Johnson,Simon AU - Robinson,James A. AU - Yared,Pierre TI - Reevaluating the Modernization Hypothesis JF - National Bureau of Economic Research Working Paper Series VL - No. 13334 PY - 2007 Y2 - August 2007 UR - http://www.nber.org/papers/w13334 L1 - http://www.nber.org/papers/w13334.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu Simon Johnson Sloan School of Management MIT E52-562 50 Memorial Drive Cambridge, MA 02142 Tel: 617/290-9618 Fax: 617/253-2660 E-Mail: sjohnson@mit.edu James A. Robinson Harvard University Department of Government N309, 1737 Cambridge Street Cambridge, MA 02138 Tel: 617/496-2839 Fax: 617/495-0438 E-Mail: jrobinson@gov.harvard.edu Pierre Yared Columbia University Graduate School of Business Uris Hall, 3022 Broadway New York, NY 10027 E-Mail: pyared@columbia.edu AB - This paper revisits and critically reevaluates the widely-accepted modernization hypothesis which claims that per capita income causes the creation and the consolidation of democracy. We argue that existing studies find support for this hypothesis because they fail to control for the presence of omitted variables. There are many underlying historical factors that affect both the level of income per capita and the likelihood of democracy in a country, and failing to control for these factors may introduce a spurious relationship between income and democracy. We show that controlling for these historical factors by including fixed country effects removes the correlation between income and democracy, as well as the correlation between income and the likelihood of transitions to and from democratic regimes. We argue that this evidence is consistent with another well-established approach in political science, which emphasizes how events during critical historical junctures can lead to divergent political-economic development paths, some leading to prosperity and democracy, others to relative poverty and non-democracy. We present evidence in favor of this interpretation by documenting that the fixed effects we estimate in the post-war sample are strongly associated with historical variables that have previously been used to explain diverging development paths within the former colonial world. ER -