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Income and Democracy: Revisiting the Evidence

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  • Enrique Moral-Benito
  • Cristian Bartolucci

Abstract

It is well-known in the literature that income per capita is strongly correlated with the level of democracy across countries. In an influential paper, Acemoglu et al. (2008) find that this linear correlation disappears once they control for country-specific effects focusing on within-country variation. In this paper we find evidence of a non-linear effect from income to democracy even after controlling for country-specific effects. While a positive effect emerges for poor countries, this effect vanishes for rich countries.

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Bibliographic Info

Paper provided by Collegio Carlo Alberto in its series Carlo Alberto Notebooks with number 204.

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Length: 20 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:cca:wpaper:204

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Keywords: Democracy; Income; Lipset hypothesis; panel data;

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  1. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-42, June.
  2. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  3. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
  4. 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.
  5. Enrique Moral-Benito, 2011. "Dynamic panels with predetermined regressors: likelihood-based estimation and Bayesian averaging with an application to cross-country growth," Banco de Espa�a Working Papers 1109, Banco de Espa�a.
  6. Erich Gundlach & Martin Paldam, 2008. "A farewell to critical junctures: Sorting out long-run causality of income and democracy," Economics Working Papers 2008-04, School of Economics and Management, University of Aarhus.
  7. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
  8. Benedikt Heid & Julian Langer & Mario Larch, 2011. "Income and democracy:Evidence from system GMM estimates," Ifo Working Paper Series Ifo Working Paper No. 118, Ifo Institute for Economic Research at the University of Munich.
  9. Hillier, Grant H, 1990. "On the Normalization of Structural Equations: Properties of Direct Estimators," Econometrica, Econometric Society, vol. 58(5), pages 1181-94, September.
  10. Simon Johnson & William Larson & Chris Papageorgiou & Arvind Subramanian, 2009. "Is Newer Better? Penn World Table Revisions and Their Impact on Growth Estimates," Working Papers 191, Center for Global Development.
  11. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  12. 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.
  13. Zak, Paul J. & Feng, Yi, 2003. "A dynamic theory of the transition to democracy," Journal of Economic Behavior & Organization, Elsevier, vol. 52(1), pages 1-25, September.
  14. Bhargava, Alok & Sargan, J D, 1983. "Estimating Dynamic Random Effects Models from Panel Data Covering Short Time Periods," Econometrica, Econometric Society, vol. 51(6), pages 1635-59, November.
  15. 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.
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Cited by:
  1. Benedikt Heid & Julian Langer & Mario Larch, 2011. "Income and democracy:Evidence from system GMM estimates," Ifo Working Paper Series Ifo Working Paper No. 118, Ifo Institute for Economic Research at the University of Munich.
  2. Benhabib, Jess & Corvalen, Alejandro & Spiegel, Mark M., 2014. "Modernization and discrete measures of democracy," Working Paper Series 2014-1, Federal Reserve Bank of San Francisco.
  3. Filipe R. Campante & Davin Chor, 2012. "Why Was the Arab World Poised for Revolution? Schooling, Economic Opportunities, and the Arab Spring," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 167-88, Spring.
  4. Matteo Cervellati & Florian Jung & Uwe Sunde & Thomas Vischer, 2014. "Income and Democracy: Comment," American Economic Review, American Economic Association, vol. 104(2), pages 707-19, February.
  5. Benhabib, Jess & Corvalan, Alejandro & Spiegel, Mark M., 2013. "Income and democracy: Evidence from nonlinear estimations," Economics Letters, Elsevier, vol. 118(3), pages 489-492.

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