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Kiel Institute for World Economics Kiel Working Papers, Kiel Institute for World Economics

No 1459:
The Democratic Transition. A study of the causality between income and the Gastil democracy index

Martin Paldam and Erich Gundlach

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 demonŽstrate 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

Keywords: Paths of development, democracy, biogeography; (follow links to similar papers)

JEL-Codes: B25,; O10; (follow links to similar papers)

23 pages, October 2008

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