Income and democracy
By: Daron Acemoglu ... [et al.].
Contributors: Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 05-05; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 05-05.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 35
Description: 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 Classifications: P16, O10.
Notes: "February 2005."

Includes bibliographical references (p. 32-35)

Abstract in HTML and working paper for download in PDF available via World Wide Web at the Social Science Research Network.