When faced with an internal legitimacy crisis should an autocratic incumbent democratize or increase repression levels? Theories of elite-led democratization have shown that when facing a situation of deep social unrest, repression is more likely in cases of high social inequality. However, many contemporary autocratic regimes are able to conciliate low levels of inequality and their autocratic features. This paper offers an innovative answer to the question of under what circumstances is elite-led democratization more attractive.

Using data for 188 autocratic regimes between 1945 and 2015, this article provides strong empirical evidence that economic clout — defined as the extent of economic influence over the international community by an autocratic regime — is a crucial factor in the autocrat’s decision to democratize. Employing a staggered Difference-in-Differences design, I empirically show that high levels of economic clout (HEC) increase democratization costs, making repression the cheapest and most attractive choice. The mechanism is twofold: (i) HEC makes extractive activity more attractive for the incumbent in power as these regimes allow for more extraction. (ii) Most importantly, the existence of HEC will prompt international trade partners to not pressure the regime to democratize in order to keep the favorable economic status quo, in order to keep benefiting from the economic gains from trade with the autocracy. In non-HEC regimes, the costs of repression will be higher since international pressure to democratize will be more pronounced, prompting the autocrat to democratize instead of investing in repression.