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http://ssrn.com/abstract=689386
 
 

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Income and Democracy


Daron Acemoglu


Massachusetts Institute of Technology (MIT) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Simon Johnson


Massachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER)

James A. Robinson


Harvard University - Department of Government; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Pierre Yared


Columbia Business School - Finance and Economics

March 2005

NBER Working Paper No. w11205

Abstract:     
We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross-country correlation between income and democracy, but do not typically control for factors that simultaneously affect both variables. We show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and various measures of democracy. We also present instrumental-variables using two different strategies. These estimates also show no causal effect of income on democracy. Furthermore, we reconcile the positive cross-country correlation between income and democracy with the absence of a causal effect of income on democracy by showing that the long-run evolution of income and democracy is related to historical factors. Consistent with this, the positive correlation between income and democracy disappears, even without fixed effects, when we control for the historical determinants of economic and political development in a sample of former European colonies.

Number of Pages in PDF File: 64

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Date posted: April 20, 2005  

Suggested Citation

Acemoglu, Daron and Johnson, Simon and Robinson, James A. and Yared, Pierre, Income and Democracy (March 2005). NBER Working Paper No. w11205. Available at SSRN: http://ssrn.com/abstract=689386

Contact Information

Daron Acemoglu (Contact Author)
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
Room E52-380b
Cambridge, MA 02142
United States
617-253-1927 (Phone)
617-253-1330 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Simon Johnson
Massachusetts Institute of Technology (MIT) - Entrepreneurship Center ( email )
United States
617-253-8412 (Phone)
617-258-6855 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
James A. Robinson
Harvard University - Department of Government ( email )
1737 Cambridge Street
Cambridge, MA 02138
United States
617-496-2839 (Phone)
617-495-8292 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Pierre Yared
Columbia Business School - Finance and Economics ( email )
3022 Broadway
Uris Hall
New York, NY 10027
United States

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Citations:  126

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