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Income and Democracy

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Author Info

  • Daron Acemoglu
  • Simon Johnson
  • James A. Robinson
  • Pierre Yared

Abstract

Existing studies establish a strong cross-country correlation between income and democracy but do not control for factors that simultaneously affect both variables. We show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and various measures of democracy. We present instrumental-variables estimates that also show no causal effect of income on democracy. The cross-country correlation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years. This pattern is consistent with the idea that societies embarked on divergent political-economic development paths at certain critical junctures.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.98.3.808
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File URL: http://www.aeaweb.org/aer/data/june08/20050219_data.zip
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 3 (June)
Pages: 808-42

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Handle: RePEc:aea:aecrev:v:98:y:2008:i:3:p:808-42

Note: DOI: 10.1257/aer.98.3.808
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References

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  1. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2005. "From Education to Democracy?," American Economic Review, American Economic Association, vol. 95(2), pages 44-49, May.
  2. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
  3. Acemoglu, Daron & Johnson, Simon H. & Robinson, James A., 2003. "The Rise of Europe: Atlantic Trade, Institutioanl Change and Economic Growth," Working papers 4269-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  4. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," CEPR Discussion Papers 4458, C.E.P.R. Discussion Papers.
  5. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  6. Marianne Baxter, 1995. "International Trade and Business Cycles," NBER Working Papers 5025, National Bureau of Economic Research, Inc.
  7. Hausmann, Ricardo & Pritchett, Lant & Rodrik, Dani, 2004. "Growth Accelerations," CEPR Discussion Papers 4538, C.E.P.R. Discussion Papers.
  8. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-63, July.
  9. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," NBER Working Papers 8460, National Bureau of Economic Research, Inc.
  10. Aart Kraay & Jaume Ventura, 2001. "Comparative Advantage and the Cross-section of Business Cycles," NBER Working Papers 8104, National Bureau of Economic Research, Inc.
  11. Dani Rodrik, 1999. "Democracies Pay Higher Wages," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 707-738, August.
  12. Daron Acemoglu & Jaume Ventura, 2002. "The World Income Distribution," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 659-694, May.
  13. repec:cup:cbooks:9780521496032 is not listed on IDEAS
  14. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  15. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 725-753, August.
  16. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2002. "How Much Should We Trust Differences-in-Differences Estimates?," NBER Working Papers 8841, National Bureau of Economic Research, Inc.
  17. Robert J. Barro, 1998. "Determinants of Economic Growth: A Cross-Country Empirical Study," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522543, January.
  18. Papaioannou, Elias & Siourounis, Gregorios, 2008. "Economic and Social Factors Driving the Third Wave of Democratization," CEPR Discussion Papers 6986, C.E.P.R. Discussion Papers.
  19. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
  20. Baxter, Marianne, 1995. "International trade and business cycles," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 35, pages 1801-1864 Elsevier.
  21. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  22. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  23. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  24. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Manuel Arellano recibe el premio Jaime I de Economía.
    by Cives in Politikon on 2012-06-05 17:13:35
  2. Income and Democracy
    by Economic Logician in Economic Logic on 2008-09-25 12:55:00
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