TY - JOUR AU - Acemoglu,Daron AU - Johnson,Simon AU - Robinson,James AU - Yared,Pierre TI - Income and Democracy JF - National Bureau of Economic Research Working Paper Series VL - No. 11205 PY - 2005 Y2 - March 2005 UR - http://www.nber.org/papers/w11205 L1 - http://www.nber.org/papers/w11205.pdf N1 - Author contact info: Daron Acemoglu Department of Economics MIT, E52-380B 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/253-1927 Fax: 617/253-1330 E-Mail: daron@mit.edu Simon Johnson MIT Sloan School of Management 100 Main Street, E52-562 Cambridge, MA 02142 Tel: 617/290-9618 Fax: 617/253-2660 E-Mail: sjohnson@mit.edu James A. Robinson Harvard University Department of Government N309, 1737 Cambridge Street Cambridge, MA 02138 Tel: 617/496-2839 Fax: 617/495-0438 E-Mail: jrobinson@gov.harvard.edu Pierre Yared Columbia University Graduate School of Business Uris Hall, 3022 Broadway New York, NY 10027 E-Mail: pyared@columbia.edu AB - We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross-country correlation between income and democracy, but do not typically 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 also present instrumental-variables using two different strategies. These estimates also show no causal effect of income on democracy. Furthermore, we reconcile the positive cross-country correlation between income and democracy with the absence of a causal effect of income on democracy by showing that the long-run evolution of income and democracy is related to historical factors. Consistent with this, the positive correlation between income and democracy disappears, even without fixed effects, when we control for the historical determinants of economic and political development in a sample of former European colonies. ER -