Abstract:
Previous empirical literature focuses on income per capita as a measure for economic development. Using Lipset's modernization hypothesis as our theoretical framework, we contend that this measure does not capture the fundamental quality of economic development and as such may disadvantage low income regions when conducting empirical analysis. Our initial results using income per capita highlight this, showing a negative relationship between income per capita and democracy for sub-Saharan Africa between 1960 and 2010. However when we create a composite measure for economic development by employing the principle component analysis on the indicators that are suggested by Lipset, we obtain positive and significant results for democracy. This evidence suggests that we need to be wary of income per capita as a measure for economic development as the two are not synonymous. Income per capita may not capture other factors that also encompass development in a country.
