The Formation and Development of Liberal Democracies

We examine the modern spread of liberal democracy, a phenomenon that was accompanied by unprecedented levels of economic development. We outline two differing accounts of the relationship between the two: One in which democratization is driven primarily by changes in normative beliefs, and another in which changes in payoffs to political actors produce democracy as a political equilibrium. The relationship between democracy and development is examined with updated panel data, covering a period from the early nineteenth century through the first decade of the twenty-first century. The analysis demonstrates a positive impact of economic development on subsequent democratic transitions, but no apparent effect of democracy on subsequent economic growth. We conclude by discussing the current literature and potential directions for research, including recent efforts to ascertain the preferences of political elites towards democracy more precisely.