Innovation Without Democratization: The Political Limits of Technological Change

Innovation has been positively linked to a variety of economic outcomes, including long-run development, productivity, and human capital. But its political effects have received far less attention. To address this imbalance, I investigate the effect of innovation on democracy and two intermediate outcomes, state capacity and capital mobility, using a shift-share in strumental variables strategy on a panel of 187 countries from 1995 to 2015. This design exploits quasi-random variation in global patenting growth across different fields of knowl edge to identify the effects of innovation. I find that innovation exerts no detectable effect on democracy, but strongly and positively increases both state capacity and capital mobility. A one-standard-deviation increase in log patents per million residents raises state capacity by approximately half a standard deviation and capital mobility by roughly a quarter of a standard deviation. I argue that the null effect of innovation on democracy stems from the offsetting influences of these two forces. State capacity reduces the elites’ costs of repression and therefore inhibits democratization, while capital mobility decreases the costs of conced ing to democracy and thus promotes it. Consistent with this account, I find that innovation widens the gap between the state’s capacity and society’s ability to hold it accountable. A widening gap should erode democracy on its own, so paired with the null it suggests that capital mobility offsets the state’s growing power. My estimates are robust across several specifications, measures, and samples.