Journal Article

A Farewell to Critical Junctures: Sorting Out Long-run Causality of Income and Democracy

Authors

  • Erich Gundlach
  • Martin Paldam
Publication Date

We consider the empirical relevance of two opposing hypotheses on the causality between income and democracy: The Democratic Transition hypothesis claims that rising incomes cause a transition to democracy, whereas the Critical Junctures hypothesis denies this causal relation. Our empirical strategy is motivated by Unified Growth Theory, which hypothesizes 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.

Info

JEL Classification
B25, O1
DOI
10.1016/j.ejpoleco.2009.02.007

Key Words

  • biogeography
  • democracy
  • Long-run growth
  • Unified growth theory