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Democratic transition, The: a study of the causality between income and the Gastil democracy index

Martin Paldam and Erich Gundlach ()

No 1459, Kiel Working Papers from Kiel Institute for the World Economy (IfW)

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)
Date: 2008
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Persistent link: http://EconPapers.repec.org/RePEc:zbw:ifwkwp:1459

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