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Yet Another Look at the Modernisation Hypothesis: Evidence from South America

We investigate in this paper whether the exogenous version of the modernisation hypothesis holds in South America, or whether democracy needs development for its own consolidation. We use a sample of all nine countries that re-democratised in the last thirty
years or so and the data sets cover two distinct periods, 1970-2007, and 1945-1969. The results, based on dynamic panel time-series data analysis (we use the Fixed Effects, Common Correlated Effects and Fixed Effects with Instrumental Variables estimators), suggest that the modernisation hypothesis holds in the region during the period 1970-2007, or that income, or development in general, plays a positive role in “sustaining” democracy. Moreover, the exogenous version of the modernisation hypothesis does survive scrutiny for the period
1945-1969 as well, a period in which the continent was relatively poorer and democracy a rather elusive concept in the region. We also test for the critical junctures hypothesis, or whether particular historical structural changes play any role in contemporaneous democratisation in the region, however we are not able to provide any concrete evidence in favour of it. Essentially, we suggest that a certain level of development is an important condition for democracy to survive and mature, which – in times of a new democratisation wave
taking place in societies with di¤erent developmental paths – is a suggestive observation.

Working paper 342
1 March 2013
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