The Democratic Transition: A Study of the Causality Between Income and the Gastil Democracy Index

26 Pages Posted: 21 Oct 2008  

Martin Paldam

University of Aarhus - Department of Economics

Erich Gundlach

University of Hamburg

Date Written: October, 21 2008

Abstract

The paper considers the transformation of the political system as countries pass through the Grand Transition from a poor developing country to a wealthy developed country. In the process most countries change from an authoritarian to a democratic political system. This is shown by using the Gastil democracy index from Freedom House. First, the basic pattern of correlations reveals that a good deal of the short- to medium-run causality appears to be from democracy to income. Then a set of extreme biogeographic instruments is used to demonstrate that the long-run causality is from income to democracy. The long-run result survives various robustness tests. We show how the Grand Transition view resolves the seeming contradiction between the long-run and the short- to medium-run effects.

Keywords: Paths of development, democracy, biogeography

JEL Classification: B25, O1

Suggested Citation

Paldam, Martin and Gundlach, Erich, The Democratic Transition: A Study of the Causality Between Income and the Gastil Democracy Index (October, 21 2008). Available at SSRN: https://ssrn.com/abstract=1287582 or http://dx.doi.org/10.2139/ssrn.1287582

Martin Paldam (Contact Author)

University of Aarhus - Department of Economics ( email )

Universitetsparken
Building 350
DK-8000 Aarhus C
Denmark
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

Erich Gundlach

University of Hamburg ( email )

Department of Economics
Von-Melle-Park 5
Hamburg, 20146
Germany
+49 40 428384589 (Phone)

HOME PAGE: http://www.erichgundlach.de

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