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Democracy and Income: taking parameter heterogeneity and cross-country dependency into account

Listed author(s):
  • Tiago Sequeira

    ()

    (Universidade da Beira Interior and CEFAGE-UBI)

This paper investigates the relationship between income and democracy using common correlated effects (CCE) estimators which take into account the fact that democracy variables are highly correlated across countries and the possibility of heterogeneous effects of income on democracy across countries. Using a wider database than ever, covering annual data from 1800 to 2010 for almost all countries, we show that overall, the effect of income on democracy is statistically non-significant or significantly negative when the time-series features of the data are taken into account. This calls back into question the controversy about the empirical effect of income on democracy.

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File URL: http://www.cefage.uevora.pt/en/content/download/5819/69231/version/1/file/2015_10.pdf
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Paper provided by University of Evora, CEFAGE-UE (Portugal) in its series CEFAGE-UE Working Papers with number 2015_10.

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Length: 29 pages
Date of creation: 2015
Handle: RePEc:cfe:wpcefa:2015_10
Contact details of provider: Postal:
Colégio Espírito SANTO

Phone: (351) 266 740 869
Web page: http://www.cefage.uevora.pt
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  1. Bobba, Matteo & Coviello, Decio, 2007. "Weak instruments and weak identification, in estimating the effects of education, on democracy," Economics Letters, Elsevier, vol. 96(3), pages 301-306, September.
  2. Fabrice Murtin & Romain Wacziarg, 2014. "The democratic transition," Journal of Economic Growth, Springer, vol. 19(2), pages 141-181, June.
  3. Natalia Bailey & George Kapetanios & M. Hashem Pesaran, 2016. "Exponent of Cross‐Sectional Dependence: Estimation and Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(6), pages 929-960, 09.
  4. Christian Morrisson & Fabrice Murtin, 2009. "The Century of Education," Journal of Human Capital, University of Chicago Press, vol. 3(1), pages 1-42.
  5. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, 07.
  6. Cervellati, Matteo & Jung, Florian & Sunde, Uwe & Vischer, Thomas, 2012. "Income, Democracy, and Critical Junctures," CEPR Discussion Papers 9259, C.E.P.R. Discussion Papers.
  7. Markus Eberhardt & Francis Teal, 2011. "Econometrics For Grumblers: A New Look At The Literature On Cross‐Country Growth Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 109-155, 02.
  8. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 158-183, December.
  9. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
  10. Jess Benhabib & Alejandro Corvalen & Mark M. Spiegel, 2011. "Reestablishing the income-democracy nexus," Working Paper Series 2011-09, Federal Reserve Bank of San Francisco.
  11. Pesaran, M.H., 2004. "‘General Diagnostic Tests for Cross Section Dependence in Panels’," Cambridge Working Papers in Economics 0435, Faculty of Economics, University of Cambridge.
  12. Jutta Bolt & Jan Luiten Zanden, 2014. "The Maddison Project: collaborative research on historical national accounts," Economic History Review, Economic History Society, vol. 67(3), pages 627-651, 08.
  13. Anke Hoeffler & Robert H. Bates & Ghada Fayad, 2012. "Income and Democracy; Lipset's Law Revisited," IMF Working Papers 12/295, International Monetary Fund.
  14. Daniel Treisman, 2011. "Income, Democracy, and the Cunning of Reason," NBER Working Papers 17132, National Bureau of Economic Research, Inc.
  15. M. Hashem Pesaran, 2015. "Testing Weak Cross-Sectional Dependence in Large Panels," Econometric Reviews, Taylor & Francis Journals, vol. 34(6-10), pages 1089-1117, December.
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