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Income and Democracy

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Author Info

  • Anke Hoeffler
  • Robert H. Bates
  • Ghada Fayad

Abstract

We revisit Lipset‘s law, which posits a positive and significant relationship between income and democracy. Using dynamic and heterogeneous panel data estimation techniques, we find a significant and negative relationship between income and democracy: higher/lower incomes per capita hinder/trigger democratization. Decomposing overall income per capita into its resource and non-resource components, we find that the coefficient on the latter is positive and significant while that on the former is significant but negative, indicating that the role of resource income is central to the result.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/295.

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Length: 26
Date of creation: 17 Dec 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/295

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Postal: International Monetary Fund, Washington, DC USA
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Fax: (202) 623-4661
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Web page: http://www.imf.org/external/pubind.htm
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Related research

Keywords: Income; Political economy; Development; Economic models; democracy; dynamic panel data; parameter heterogeneity; cross-section dependence; time series; democratization; error correction coefficient; econometrics; political institutions; political science; dynamic heterogeneous panels; cross-sectional demeaning; democratic transitions; regression residuals; regression results; time series models; democratic governance; executive power; political protests; political instability; dynamic models; linear regression; political benefits; political organizations; country dummies; econometric evidence; baseline regression; instrumental variables regression; pooled time series; econometric theory; political rights;

This paper has been announced in the following NEP Reports:

References

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  1. Jerry Coakley & Ana-Maria Fuertes & Ron Smith, 2004. "Unobserved Heterogeneity in Panel Time Series Models," Birkbeck Working Papers in Economics and Finance 0403, Birkbeck, Department of Economics, Mathematics & Statistics.
  2. 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.
  3. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 99-125, January.
  4. Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Cowles Foundation Discussion Papers 1222, Cowles Foundation for Research in Economics, Yale University.
  5. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
  6. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  7. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
  8. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
  9. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  10. Pesaran, M.H., 1996. "The Role of Economic Theory in Modelling the Long Run," Cambridge Working Papers in Economics 9612, Faculty of Economics, University of Cambridge.
  11. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  12. Paul J. Burke & Andrew Leigh, 2010. "Do output contractions trigger democratic change?," CEPR Discussion Papers 633, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  13. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  14. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
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Cited by:
  1. Hugo J. Faria & Hugo M. Montesinos-Yufa & Daniel R. Morales, 2014. "Should the Modernization Hypothesis Survive Acemoglu, Johnson, Robinson, and Yared? Some More Evidence," Econ Journal Watch, Econ Journal Watch, vol. 11(1), pages 17-36, January.

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