Income and Democracy

Daron Acemoglu, Simon Johnson, James Alan Robinson () and Pierre Yared

No 11205, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: P16 O10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-cdm, nep-cwa, nep-dev and nep-ltv
Date: Written 2005-03
Note: EFG POL
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Working Paper: Income and Democracy (2005)
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