A farewell to critical junctures: Sorting out long-run causality of income and democracy

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.     

Interaction effects in cross-national studies

One may analyse interaction effects either by adding a multiplicative term to an ordinary regression equation or by group comparisons. The effects of human capital formation and government revenues on economic growth in LDCs serve as an example. The proposition under discussion claims that high government revenues (as a share of GDP) cancel the otherwise positive effects of human capital formation on economic growth. This proposition cannot be supported in regression analyses with an interaction term, although it receives rather strong support from comparisons of linear-additive regressions of growth of rates on human capital formation separately done for high and low revenue countries. This result leads to the question which technique and thereby which finding should be adopted. Since regression analyses with interaction terms investigate, whether an interaction of a restricted, symmetrical type applies, group comparisons should often be preferred.     

Zur Theorie des totalen Gleichgewichtes

Ohne Zusammenfassung     

Emerging needs of social innovators and social innovation ecosystems

International Entrepreneurship and Management Journal - Social innovations (SIs) contribute to solving or at least mitigating many of the most pressing grand challenges. Similar to profit-oriented...