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Income and democracy: revisiting the evidence

  • Enrique Moral-Benito

    (Banco de España)

  • Cristian Bartolucci

    (Collegio Carlo Alberto)

It is well-known in the literature that income per capita is strongly correlated with the level of democracy across countries. In an infl uential paper, Acemoglu et al. (2008) fi nd that this linear correlation disappears once they control for country-specifi c effects focusing on within-country variation. In this paper we fi nd evidence of a non-linear effect from income to democracy even after controlling for country-specifi c effects. While a positive effect emerges for poor countries, this effect vanishes for rich countries.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/11/Fich/dt1115e.pdf
File Function: First version, July 2011
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1115.

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Length: 28 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:bde:wpaper:1115
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  1. Robert J. Barro, 1995. "Inflation and Economic Growth," NBER Working Papers 5326, National Bureau of Economic Research, Inc.
  2. Erich Gundlach & Martin Paldam, 2008. "A Farewell to Critical Junctures: Sorting Out Long-run Causality of Income and Democracy," Kiel Working Papers 1410, Kiel Institute for the World Economy.
  3. Johnson, Simon & Larson, William & Papageorgiou, Chris & Subramanian, Arvind, 2013. "Is newer better? Penn World Table Revisions and their impact on growth estimates," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 255-274.
  4. Zak, Paul J. & Feng, Yi, 2003. "A dynamic theory of the transition to democracy," Journal of Economic Behavior & Organization, Elsevier, vol. 52(1), pages 1-25, September.
  5. Jess Benhabib & Alejandro Corvalan & Mark M. Spiegel, 2011. "Reestablishing the income-democracy nexus," Working Paper Series 2011-09, Federal Reserve Bank of San Francisco.
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  7. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  8. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
  9. Heid, Benedikt & Langer, Julian & Larch, Mario, 2012. "Income and democracy: Evidence from system GMM estimates," Economics Letters, Elsevier, vol. 116(2), pages 166-169.
  10. Hillier, Grant H, 1990. "On the Normalization of Structural Equations: Properties of Direct Estimators," Econometrica, Econometric Society, vol. 58(5), pages 1181-94, September.
  11. Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005. "Income and Democracy," CEPR Discussion Papers 5273, C.E.P.R. Discussion Papers.
  12. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  13. Bhargava, Alok & Sargan, J D, 1983. "Estimating Dynamic Random Effects Models from Panel Data Covering Short Time Periods," Econometrica, Econometric Society, vol. 51(6), pages 1635-59, November.
  14. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
  15. Enrique Moral-Benito, 2011. "Dynamic panels with predetermined regressors: likelihood-based estimation and Bayesian averaging with an application to cross-country growth," Banco de Espa�a Working Papers 1109, Banco de Espa�a.
  16. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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