Income, democracy and output growth volatility revisited

Giovannio Battista Pittaluga, Alessio Reghezza, Elena Seghezza, John Thornton

Research output: Contribution to journalArticlepeer-review


Economic diversification increases the level of democracy and leads to greater output stability. This is because diversification is associated with an increased share of the population organized into interest groups that compete to pressure governments to pursue policies favouring their particular group. The increase in the share of the population organized in this way is indicative of an increase in the level of democracy. As diversification and the level of democracy (number of interest groups) increases, the government must pursue policies aimed at satisfying the largest number of groups, which limits its scope to implement policies that destabilize output growth. Empirical support for these hypotheses is provided from applying dynamic and heterogeneous panel data estimation techniques to a panel of 117 countries over 1995–2015. The results show a positive and significant relationship between economic diversification and democracy, on the one hand, and between diversification and output stability, on the other hand. Moreover, the positive impact of economic development on democracy and output volatility is conditional on development being accompanied by economic diversification.

Original languageEnglish
JournalApplied Economics
Early online date29 Jan 2024
Publication statusE-pub ahead of print - 29 Jan 2024


  • Economic diversification
  • Democracy
  • Income
  • Output volatility
  • income
  • democracy
  • output volatility

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