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Does democracy drive income in the world, 1500–2000?

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  • Madsen, Jakob B.
  • Raschky, Paul A.
  • Skali, Ahmed

Abstract

Using data for political regimes, income and human capital for a sample of 141 countries over the periods 1820–2000 and 1500–2000, this research examines the income and growth effects of democracy when human capital, among other key variables, is controlled for. Linguistic distance-weighted foreign democracy is used as an instrument for domestic democracy. Democracy is found to be a significant determinant of income and growth and the result is robust to various estimation methods and covariates. We find that a one-standard deviation increase in democracy is associated with a 44–98% increase in per capita income.

Suggested Citation

  • Madsen, Jakob B. & Raschky, Paul A. & Skali, Ahmed, 2015. "Does democracy drive income in the world, 1500–2000?," European Economic Review, Elsevier, vol. 78(C), pages 175-195.
  • Handle: RePEc:eee:eecrev:v:78:y:2015:i:c:p:175-195
    DOI: 10.1016/j.euroecorev.2015.05.005
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    Cited by:

    1. Karaman, Kivanç & Pamuk, Sevket & Yildirim, Secil, 2018. "Money and Monetary Stability in Europe, 1300-1914," CEPR Discussion Papers 12583, C.E.P.R. Discussion Papers.
    2. Pierre-Guillaume Méon & Khalid Sekkat, 2016. "A time to throw stones, a time to reap: How long does it take for democratic transitions to improve institutional outcomes?," Working Papers CEB 16-016, ULB -- Universite Libre de Bruxelles.
    3. repec:eee:chieco:v:46:y:2017:i:c:p:180-207 is not listed on IDEAS
    4. repec:eee:joepsy:v:63:y:2017:i:c:p:184-198 is not listed on IDEAS
    5. Klaus Gründler & Tommy Krieger, 2019. "Should We Care (More) About Data Aggregation? Evidence from the Democracy-Growth-Nexus," CESifo Working Paper Series 7480, CESifo Group Munich.
    6. Skali, Ahmed, 2017. "Moralizing gods and armed conflict," Journal of Economic Psychology, Elsevier, vol. 63(C), pages 184-198.
    7. repec:eee:poleco:v:56:y:2019:i:c:p:115-131 is not listed on IDEAS
    8. Gründler, Klaus & Krieger, Tommy, 2016. "Democracy and growth: Evidence from a machine learning indicator," European Journal of Political Economy, Elsevier, vol. 45(S), pages 85-107.

    More about this item

    Keywords

    Democracy; Economic growth; Human capital; Long-term economic development;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H1 - Public Economics - - Structure and Scope of Government
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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