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

  • Erich Gundlach
  • Martin Paldam

    ()

    (School of Economics and Management, University of Aarhus, Denmark)

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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Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2008-04.

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Length: 25
Date of creation: 18 Feb 2008
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Handle: RePEc:aah:aarhec:2008-04
Contact details of provider: Web page: http://www.econ.au.dk/afn/

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  8. Erich Gundlach & Martin Paldam, 2008. "The Democratic Transition. A study of the causality between income and the Gastil democracy index," Economics Working Papers 2008-15, School of Economics and Management, University of Aarhus.
  9. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2007. "Reevaluating the Modernization Hypothesis," CEPR Discussion Papers 6430, C.E.P.R. Discussion Papers.
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  18. 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.
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