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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

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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File URL: http://www.ifw-members.ifw-kiel.de/publications/a-farewell-to-critical-junctures-sorting-out-long-run-causality-of-income-and-democracy/KWP_1410_EG-MP-Democracy_KWP_19%20Mar%2008.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1410.

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Length: 26 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:kie:kieliw:1410

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Keywords: Long-run growth; Democracy; Unified growth theory; biogeography;

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  1. 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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  5. Borooah, Vani K. & Paldam, Martin, 2007. "Why is the world short of democracy?: A cross-country analysis of barriers to representative government," European Journal of Political Economy, Elsevier, vol. 23(3), pages 582-604, September.
  6. 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.
  7. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
  8. Margaret S. McMillan & William A. Masters, 2000. "Climate and scale in economic growth," CSAE Working Paper Series 2000-13, Centre for the Study of African Economies, University of Oxford.
  9. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions As The Fundamental Cause Of Long-Run Growth," DOCUMENTOS CEDE 002889, UNIVERSIDAD DE LOS ANDES-CEDE.
  10. 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.
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  12. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  13. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
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  15. Olsson, Ola & Hibbs Jr., Douglas A., 2000. "Biogeography and Long-Run Economic Development," Working Papers in Economics 26, University of Gothenburg, Department of Economics, revised 11 Aug 2000.
  16. 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.
  17. Gary D. Hansen & Edward C. Prescott, 1998. "Malthus to Solow," NBER Working Papers 6858, National Bureau of Economic Research, Inc.
  18. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World
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  19. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
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  21. 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.
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