American Economic Review Vol. 98 No. 3 2008

Income and Democracy

Daron Acemoglu¹; Simon Johnson²; James A. Robinson³; Pierre Yared⁴

¹ Department of Economics, Massachusetts Institute of Technology, 50 Memorial Drive, Cambridge, MA 02139. · ² Sloan School of Management, MIT, 50 Memorial Drive, Cambridge, MA 02139, and International Monetary Fund. · ³ Department of Government and IQSS, Harvard University, 1737 Cambridge St., Cambridge MA 02138. · ⁴ Columbia University, Graduate School of Business, Uris Hall, 3022 Broadway, New York, NY 10027.

Abstract

Existing studies establish a strong cross-country correlation between income and democracy but do not 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 present instrumental-variables estimates that also show no causal effect of income on democracy. The cross-country correlation between income and democracy reflects a positive correlation between changes in income and democracy over the past 500 years. This pattern is consistent with the idea that societies embarked on divergent political-economic development paths at certain critical junctures.

DOI

10.1257/aer.98.3.808

Volume

98

Issue

3

Pages

808-842

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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