The Democratic Transition. A study of the causality between income and the Gastil democracy index

Erich Gundlach and Martin Paldam

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

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 (search for similar items in EconPapers)
JEL-codes: B25 O1 (search for similar items in EconPapers)
Pages: 24
Date: 2008-10-21
New Economics Papers: this item is included in nep-cdm, nep-dev and nep-pol
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:aah:aarhec:2008-15

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