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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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  4. 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.
  5. Galor, Oded & Moav, Omer, 2001. "Natural Selection and the Origin of Economic Growth," CEPR Discussion Papers 2727, C.E.P.R. Discussion Papers.
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  7. 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.
  8. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2004. "Institutions as the Fundamental Cause of Long-Run Growth," CEPR Discussion Papers 4458, C.E.P.R. Discussion Papers.
  9. Oded Galor, 2004. "From Stagnation to Growth: Unified Growth Theory," GE, Growth, Math methods 0409003, EconWPA.
  10. Martin Paldam & Erich Gundlach, 2008. "The Democratic Transition. A study of the causality between income and the Gastil democracy index," Kiel Working Papers 1459, Kiel Institute for the World Economy.
  11. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
  12. 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.
  13. 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.
  14. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  15. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  16. 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.
  17. Olsson, Ola & Hibbs, Douglas Jr., 2005. "Biogeography and long-run economic development," European Economic Review, Elsevier, vol. 49(4), pages 909-938, May.
  18. Robert J. Barro, 1999. "Determinants of Democracy," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S158-S183, December.
  19. William A. Masters & Margaret S. McMillan, 2000. "Climate and Scale In Economic Growth," CID Working Papers 48, Center for International Development at Harvard University.
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  21. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  22. Paldam, Martin & Gundlach, Erich, 2008. "Democratic transition, The: a study of the causality between income and the Gastil democracy index," Kiel Working Papers 1459, Kiel Institute for the World Economy (IfW).
  23. 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.
  24. Gregory Clark, 2007. "Introduction to A Farewell to Alms: A Brief Economic History of the World
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  25. Gundlach, Erich & Paldam, Martin, 2008. "The transition of corruption: From poverty to honesty," Kiel Working Papers 1411, Kiel Institute for the World Economy (IfW).
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