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Income and Decmocracy

by Daron Acemoglu, Simon Johnson, James A. Robinson and Pierre Yared. Reading for week of September 21, 2004


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 income and democracy.   We show that controlling for such factors removes the statistical association between income per capita and various measures of democracy.  This is true both when we include country fixed effects, and when we control directly for potential historical determinants of political and economic development in a sample of former European colonies.  Overall, these results provide little support for the hypothesis that income causes democracy.  Rather, different countries appear to have followed different political and economic development paths, some leading to prosperity and democracy in the long run, others to relative poverty and non-democracy.  Conditional on the development path, there is little effect of income on democracy.  Consistent with the interpretation, there is a positive correlation between changes in income and democracy when we look over the last 500 years.

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