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A Farewell to Critical Junctures: Sorting Out Long-run Causality of Income and Democracy

  • Erich Gundlach
  • Martin Paldam

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 Kiel Institute for the World Economy in its series Kiel Working Papers with number 1410.

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Length: 26 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:kie:kieliw:1410
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  1. Martin Paldam & Erich Gundlach, 2007. "Two Views on Institutions and Development: The Grand Transition vs the Primacy of Institutions," Economics Working Papers 2007-02, School of Economics and Management, University of Aarhus.
  2. Persson, Torsten & Tabellini, Guido, 2006. "Democratic Capital: The Nexus of Political and Economic Change," CEPR Discussion Papers 5654, C.E.P.R. Discussion Papers.
  3. Hongyi Li & Lyn Squire & Tao Zhang & Heng-fu Zou, 1999. "A Data Set on Income Distribution," CEMA Working Papers 575, China Economics and Management Academy, Central University of Finance and Economics.
  4. 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.
  5. Barro, Robert J., 1999. "Determinants of Democracy," Scholarly Articles 3451297, Harvard University Department of Economics.
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  10. Olsson, Ola & Hibbs, Douglas Jr., 2005. "Biogeography and long-run economic development," European Economic Review, Elsevier, vol. 49(4), pages 909-938, May.
  11. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," NBER Working Papers 10481, National Bureau of Economic Research, Inc.
  12. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
  13. Gary D. Hansen & Edward C. Prescott, 1999. "Malthus to Solow," Staff Report 257, Federal Reserve Bank of Minneapolis.
  14. 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.
  15. 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.
  16. Margaret S. McMillan & William A. Masters, 2000. "Climate and scale in economic growth," CSAE Working Paper Series 2000-13, Centre for the Study of African Economies, University of Oxford.
  17. 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.
  18. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World
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  19. Oded Galor, 2004. "From Stagnation to Growth: Unified Growth Theory," GE, Growth, Math methods 0409003, EconWPA.
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  21. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
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