Transition Report 2013 Stuck in transition?

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Facts at a glance

70% Global proportion of countries which had democratic institutions in 2012, compared with 30 to 40 per cent from 1960 to 1990.

INCOME IN 1992 is correlated with levels of democracy in 2012 in a global sample.

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94% of countries with average per capita income above US$ 10,000 held free and competitive elections in 1999.

BY 2000 all constituent democracies of the former Yugoslavia had become full democracies.

Markets and democracy

Box 2.1. The role of the middle class

What is the role of the middle class in promoting democratic transition? In much of the literature on modernisation, starting with Lipset (1959), there is a strong belief that the middle class – once it reaches a certain size – is a bulwark of both open markets and democracy.1

Middle-class people, defined in terms of their income, education and profession, are thought more likely to support fundamental market values, such as the protection of property rights and the even-handed application of laws governing regulation of the economy. They are also assumed to derive from their income and social position a growing preference for democratic government and competitive elections, a limited and accountable state, and guarantees of universal human rights and freedoms. In addition, those with sufficient income and social status should have the resources to organise and engage in political activity to promote their collective interests.

Is there any evidence for the hypothesis that economic development leads to the emergence of a middle class, which in turn has the socio-economic influence and organisational capacity necessary to demand increased accountability from its leaders?

Using data on household income and expenditure compiled by researchers at the World Bank,2we have undertaken a regression analysis relating the level of democratisation (measured, as previously, by the Polity2 variable) to the size of the middle class, defined as the percentage of individuals that have an income of between US$ 10 and US$ 50 per day. As this is an income variable and therefore correlated with GDP per capita, the model omits the latter. The same regression technique is used as in Table 2.2.

As Table 2.1.1 shows, the size of the middle class is very strongly correlated with the lagged level of democracy in both non-transition and transition countries. However, the middle class becomes insignificant in the transition region when inequality is also taken into account, while its role in the rest of the world becomes even more important when inequality is included.

Table 2.1.1

Role of the middle class in democracy, 1989-2012

Dependent variable: Polity
  Countries outside the transition region Countries in the transition region
  (1) (2) (3) (4)
Polity at t-5 0.753*** 0.716*** 0.776*** 0.760***
Size of middle class at t-5 2.064** 3.019*** 2.000** 1.644
Natural resource rents at t-5 -0.019 -0.017 -0.046*** -0.051***
Inequality at t-5   0.025   -0.014
Observations 243 231 57 56
Countries 92 90 27 27
Wald chi2 835.16 650.41 392.53 380.11
Prob>chi2 0.000 0.000 0.000 0.000

Source: Loayza et al. (2012) for the size of the middle class; sources in Table 2.2 for remaining variables.
Note: See notes on Table 2.2 for details of the methodology.

  1. See Lipset (1959), Moore (1966), Huber et al. (1993), Barro (1999), Birdsall et al. (2000), Easterly (2001) and Loayza et al. (2012).[back]
  2. See Loayza et al. (2012). [back]