Income and Democracy
66 Pages Posted: 15 Nov 2005
There are 2 versions of this paper
Income and Democracy
Date Written: October 2005
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 estimates 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.
Keywords: Democracy, economic growth, institutions, political development
JEL Classification: O10, P16
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By Daron Acemoglu, Simon Johnson, ...
-
By Daron Acemoglu, Simon Johnson, ...
-
Do Democracies Have Different Public Policies than Nondemocracies?
By Casey B. Mulligan, Xavier Sala-i-martin, ...
-
Democratic Capital: The Nexus of Political and Economic Change
By Torsten Persson and Guido Tabellini
-
Democratic Capital: The Nexus of Political and Economic Change
By Torsten Persson and Guido Tabellini
-
Democratic Capital: The Nexus of Political and Economic Change
By Torsten Persson and Guido Tabellini