Although democracy did not evolve as a measure of economic development nor its arguments explicitly contains economic seeds, yet it is expected that a regime participated by everybody will be economically rewarding. Democracy can be considered as political diversification, existence of which is crucially dependent on active participation of people from all social strata in voting process. If people of different strata do not find any direct relationship between their economic status and democracy then it is less likely that they will participate (or at least enthusiastically participate).
Following the idea of Lipset (1959) many studies have contributed to the literature focusing on democracy and economic development. Lipset (1959) put forward the idea that when income increases there is a tendency for society to become more democratic. Following this seminal article there is a plethora of studies addressing this relationship.
Existing literature, such as Kolstad & Wiig (2014), Flachaire, García-Peñalosa, & Konte
(2014), Man (2014), Madsen, Raschky, & Skali (2015), Asatryan & De Witte (2015),
Robinson (2006), Acemoglu, Johnson, Robinson, & Yared (2005), Salahodjaev (2015) and
(Gerring, Kingstone, Lange, & Aseema, 2011), provides studies on various ideas related to democracy and economic diversification. However, we do not find any study, which directly study the relationship between democracy and economic diversification for a country like Bangladesh. Hence, we contribute to the literature by carrying out a study, which analyzes the effect of democracy on economic diversification.
Bangladesh maintains a liberal democracy, which is often times interrupted by ambitious military leaders and/or authoritative political leaders which leads to undermining of democratic values and creation of potential breeding ground for non-democratic forces.
However, strong protests with (with frequent violence) from general people have successfully opposed such fancy ideas in the past.
Bangladesh has recently graduated from low income countries and reached to middle income cohort. This is certainly recognition of their hard work and careful planning in last few decades. However, this also puts them into different situation as now they have to face what is commonly known in literature as middle income trap. Somehow they have to come up with strategies to adjust with the standard and expectations from middle income group countries and at the same time maintain economic progress so that they can move to high income countries. In that respect it is very important to know the dynamics between political and economic institutions.
In this proposed paper we would like to investigate whether there is any relationship between political diversification and economic diversification. We would also like to investigate into relationship between these two and export and import diversification.
Findings of such study are important for policy makers as for sake of sustainable growth and eliminate vulnerability the country needs to use diversification wisely.
The paper will be structured as follows. After introductory comments we plan to present review of relevant literature. Then methodology and data will be presented which will be followed by econometric results and related discussion. Concluding remarks will be presented in the last section.
Track: Economics
Miss Nabila Maruf (Corresponding author), Lecturer, Department of Economics, Independent University
Bangladesh, Plot 16, Block B Aftabuddin Ahmed Road, Bashundhara R/A, Dhaka, Bangladesh,
Email: nabilamaruf@gmail.com
,
Dr. A. F. M. Ataur Rahman, Vice-President Bangladesh Development Research Center and Professor of
Economics, North South University Plot 15, Block B, Bashundhara Dhaka 1229, Bangladesh,
Email: ataur.rahman@northsouth.edu
,

Acemoglu, D., Johnson, S., Robinson, J. A., & Yared, P. 2005. Income and Democracy.
National Bureau of Economic Research .
Asatryan, Z., & De Witte, K. 2015. Direct democracy and local government efficiency.
European Journal of Political Economy, 39 : 58-66.
Flachaire, E., García-Peñalosa, C., & Konte, M. 2014. Political versus economic institutions in the growth process. Journal of Comparative Economics : 212-229.
Gerring, J., Kingstone, P., Lange, M., & Aseema, S. 2011. Democracy, History and
Economic Performance: A Case-Study Approach. World Development, 39 (10):1735-
1748.
Kolstad, I., & Wiig, A. 2014. Diversification and Democracy. CMI Working Paper .
Lipset, S. M. 1959. Some Social Requisites of Democracy: Economic Development and
Political Legitimacy. The American Political Science Review, 53 (1) : 69-105.
Madsen, J. B., Raschky, P. A., & Skali, A. 2015. Does democracy drive income in the world, 1500-2000? European Economic Review, 78 :175-195.
Man, G. 2014. Political competition and economic growth: A nonlinear relationship?
European Journal of Political Economy : 287-302.
Robinson, J. A. 2006. Economic Development and Democracy. Annu. Rev. Polit. Sci., 9
:503-527.
Salahodjaev, R. 2015. Democracy and economic growth: The role of intelligence in crosscountry regressions. Intelligence, 50 : 228-234.