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The effect of income on democracy revisited: A flexible distributional approach

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  • Idzalika, Rajius
  • Kneib, Thomas
  • Martinez-Zarzoso, Inmaculada
Abstract
We reexamine the effect of economic development on the level of democracy based on the data sets of Acemoglu et al. (2008) with a novel regression specification utilizing a zero-one-inflated beta distribution for the response variable democracy. The zero-one-inflated beta distribution is more appropriate for continuous but bounded responses with non-zero probabilities for the boundaries of the support than the other frequently used distributions such as the normal. Contrary to the results of Acemoglu et al. (2008), some support of causality is found particularly when explaining the variance of the democracy variables. Since our analysis highlights that the distribution of democracy is bimodal, we approximate the modes using two separate samples of OECD and non-OECD countries. Our results indicate that there are differences not only in the mean but also in other features of the response distribution between the two groups. For instance, higher incomes are associated with higher democracy levels in the OECD sub-sample, however for non-OECD the association is insignificant.

Suggested Citation

  • Idzalika, Rajius & Kneib, Thomas & Martinez-Zarzoso, Inmaculada, 2015. "The effect of income on democracy revisited: A flexible distributional approach," University of Göttingen Working Papers in Economics 247, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:247
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    References listed on IDEAS

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    1. Daron Acemoglu & Suresh Naidu & Pascual Restrepo & James A. Robinson, 2019. "Democracy Does Cause Growth," Journal of Political Economy, University of Chicago Press, vol. 127(1), pages 47-100.
    2. Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2008. "Income and Democracy," American Economic Review, American Economic Association, vol. 98(3), pages 808-842, June.
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    5. Moral-Benito, Enrique & Bartolucci, Cristian, 2012. "Income and democracy: Revisiting the evidence," Economics Letters, Elsevier, vol. 117(3), pages 844-847.
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    Cited by:

    1. Tian, Jilin & Sim, Nicholas & Yan, Wenshou & Li, Yanyun, 2020. "Trade uncertainty, income, and democracy," Economic Modelling, Elsevier, vol. 90(C), pages 21-31.

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    More about this item

    Keywords

    income; democracy; beta distribution; bimodal; OECD;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions

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