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A farewell to critical junctures: Sorting out long-run causality of income and democracy

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  • Erich Gundlach
  • Martin Paldam

    ()
    (School of Economics and Management, University of Aarhus, Denmark)

Abstract

We consider the empirical relevance of two opposing hypotheses on the causality between income and democracy: The Democratic Transition claims that rising incomes cause a transi¬ tion to democracy, whereas the Critical Junctures hypothesis denies this causal relation. Our empirical strategy is justified by Unified Growth Theory, which hypothe¬sizes that the present international income differences have roots in the prehistoric past. Thus, we use prehistoric measures of biogeography as instruments for modern income levels, and find a large long-run causal effect of income on the degree of democracy. This result rejects the Critical Junctures hypothesis, which is an important part of the Primacy of Institutions view.

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Bibliographic Info

Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2008-04.

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Length: 25
Date of creation: 18 Feb 2008
Date of revision:
Handle: RePEc:aah:aarhec:2008-04

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Web page: http://www.econ.au.dk/afn/

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Keywords: Long-run growth; democracy; unified growth theory; biogeography;

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  1. Martin Paldam & Erich Gundlach, 2007. "Two Views on Institutions and Development: The Grand Transition vs the Primacy of Institutions," Economics Working Papers 2007-02, School of Economics and Management, University of Aarhus.
  2. Oded Galor & Omer Moav, 2002. "Natural Selection And The Origin Of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 117(4), pages 1133-1191, November.
  3. Gary D. Hansen & Edward C. Prescott, 1998. "Malthus to Solow," NBER Working Papers 6858, National Bureau of Economic Research, Inc.
  4. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
  5. Olsson, Ola & Hibbs, Douglas Jr., 2005. "Biogeography and long-run economic development," European Economic Review, Elsevier, vol. 49(4), pages 909-938, May.
  6. Torsten Persson & Guido Tabellini, 2009. "Democratic Capital: The Nexus of Political and Economic Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(2), pages 88-126, July.
  7. Galor, Oded, 2005. "From Stagnation to Growth: Unified Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 4, pages 171-293 Elsevier.
  8. Martin Paldam & Erich Gundlach, 2008. "The Democratic Transition. A study of the causality between income and the Gastil democracy index," Kiel Working Papers 1459, Kiel Institute for the World Economy.
  9. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2007. "Reevaluating the Modernization Hypothesis," CEPR Discussion Papers 6430, C.E.P.R. Discussion Papers.
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  12. Vani K. Borooah & Martin Paldam, 2006. "Why is the World Short of Democracy? A Cross-Country Ananlysis of Barriers to Representative Government," ICER Working Papers 28-2006, ICER - International Centre for Economic Research.
  13. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005. "Income and Democracy," CEPR Discussion Papers 5273, C.E.P.R. Discussion Papers.
  14. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
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  16. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World
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  17. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
  18. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  19. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
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