The paper considers the transformation of the political system as countries pass through the Grand Transition from a poor developing country to a wealthy developed country. In the process most countries change from an authoritarian to a democratic political system. This is shown by using the Gastil democracy index from Freedom House. First, the basic pattern of correlations reveals that a good deal of the short- to medium-run causality appears to be from democracy to income. Then a set of extreme biogeographic instruments is used to demon¬strate that the long-run causality is from income to democracy. The long-run result survives various robustness tests. We show how the Grand Transition view resolves the seeming contradiction between the long-run and the short- to medium-run effects
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number
1459.
Find related papers by JEL classification: B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
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