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A farewell to critical junctures: Sorting out long-run causality of income and democracy

  • Gundlach, Erich
  • Paldam, Martin

We consider the empirical relevance of two opposing hypotheses on the causality between income and democracy: The Democratic Transition hypothesis claims that rising incomes cause a transition to democracy, whereas the Critical Junctures hypothesis denies this causal relation. Our empirical strategy is motivated by Unified Growth Theory, which hypothesizes 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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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 25 (2009)
Issue (Month): 3 (September)
Pages: 340-354

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Handle: RePEc:eee:poleco:v:25:y:2009:i:3:p:340-354
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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  9. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  10. Martin Paldam & Erich Gundlach, 2007. "Two Views on Institutions and Development: The Grand Transition vs the Primacy of Institutions," Economics Working Papers 2007-02, Department of Economics and Business Economics, Aarhus University.
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  12. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World
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  15. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  16. Martin Paldam, 2007. "An essay on the Muslim Gap. Religiosity and the political system," Economics Working Papers 2007-04, Department of Economics and Business Economics, Aarhus University.
  17. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
  18. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
  19. Oded Galor & Omer Moav, 2002. "Natural Selection and the Origin of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1133-1191.
  20. Vani K. Borooah & Martin Paldam, 2006. "Why is the World Short of Democracy? A Cross-Country Ananlysis of Barriers to Representative Government," ICER Working Papers 28-2006, ICER - International Centre for Economic Research.
  21. Gundlach, Erich & Paldam, Martin, 2009. "The transition of corruption: From poverty to honesty," Economics Letters, Elsevier, vol. 103(3), pages 146-148, June.
  22. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
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  24. 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.
  25. Peter Sandholt Jensen & Martin Paldam, 2007. "The Pattern of Democracy in the Twentieth Century: A Study of the Polity Index," Chapters, in: Public Choice and the Challenges of Democracy, chapter 15 Edward Elgar Publishing.
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