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

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  • Paldam, Martin
  • Gundlach, Erich

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.

Suggested Citation

  • Paldam, Martin & Gundlach, Erich, 2008. "Democratic transition, The: a study of the causality between income and the Gastil democracy index," Kiel Working Papers 1459, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1459
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    Cited by:

    1. Gundlach, Erich & Paldam, Martin, 2009. "A farewell to critical junctures: Sorting out long-run causality of income and democracy," European Journal of Political Economy, Elsevier, vol. 25(3), pages 340-354, September.
    2. Gundlach, Erich & Paldam, Martin, 2009. "The agricultural and the democratic transitions: causality and the roundup model," Kiel Working Papers 1521, Kiel Institute for the World Economy (IfW Kiel).
    3. Martin Paldam, 2019. "Does system instability harm development? A comparative empirical study of the long run," Economics Working Papers 2019-07, Department of Economics and Business Economics, Aarhus University.
    4. Erich Gundlach & Martin Paldam, 2016. "Socioeconomic transitions as common dynamic processes," Economics Working Papers 2016-06, Department of Economics and Business Economics, Aarhus University.
    5. Erich Gundlach & Martin Paldam, 2012. "Some Empirics of Socio-Economic Transitions. Estimating the Common Pattern," DEGIT Conference Papers c017_025, DEGIT, Dynamics, Economic Growth, and International Trade.
    6. Gundlach, Erich & Paldam, Martin, 2009. "The transition of corruption: From poverty to honesty," Economics Letters, Elsevier, vol. 103(3), pages 146-148, June.
    7. Lidia CERIANI & Simona SCABROSETTI, 2011. "The distributional impact of privatization in developing countries: the role of democratic institutions," Departmental Working Papers 2011-31, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.

    More about this item

    Keywords

    Paths of development; democracy; biogeography;
    All these keywords.

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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