Department of Economics and Business Economics

A farewell to critical junctures: Sorting out long-run causality of income and democracy

Research output: Working paperResearch

  • Erich Gundlach, Kiel Institute for the World Economy, Germany
  • Martin Paldam
  • School of Economics and Management
We consider the empirical relevance of two opposing hypotheses on the causality between
income and democracy: The Democratic Transition claims that rising incomes cause a transi¬
tion to democracy, whereas the Critical Junctures hypothesis denies this causal relation. Our
empirical strategy is justified by Unified Growth Theory, which hypothe¬sizes that the present
international income differences have roots in the prehistoric past. Thus, we use prehistoric
measures of biogeography as instruments for modern income levels, and find a large long-run
causal effect of income on the degree of democracy. This result rejects the Critical Junctures
hypothesis, which is an important part of the Primacy of Institutions view.
Original languageEnglish
Place of publicationAarhus
PublisherInstitut for Økonomi, Aarhus Universitet
Number of pages25
Publication statusPublished - 2008

    Research areas

  • Long-run growth, democracy, unified growth theory, biogeography

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ID: 10464749