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Income and Democracy: A Smooth Varying Coefficient Redux
Author(s) -
Lundberg Alexander L.,
Huynh Kim P.,
JachoChávez David T.
Publication year - 2016
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2536
Subject(s) - redux , democracy , economics , parametric statistics , econometrics , class (philosophy) , panel data , test (biology) , mathematical economics , mathematics , computer science , statistics , political science , politics , law , paleontology , artificial intelligence , engineering , biology , aerospace engineering
Summary Acemoglu et al. ( American Economic Review 2008; 98 : 808–842) find no effect of income on democracy when controlling for fixed effects in a dynamic panel model. Work by Moral‐Benito and Bartolucci ( Economics Letters 2012; 117 : 844–847) and Cervellati et al. ( American Economic Review 2014; 104 : 707–719) suggests that the original model might have been misspecified and proposes alternative specifications instead. We formally test these parametric specifications by implementing Lee's ( Journal of Econometrics 2014; 178 : 146–166) dynamic panel test of linear parametric specifications against a general class of nonlinear alternatives robustly and reject all these specifications. However, using a more flexible model proposed by Cai and Li ( Econometric Theory 2008; 24 : 1321–1342) we find that the relationship between income and democracy appears to be mediated by education, but results are not statistically significant. Copyright © 2016 John Wiley & Sons, Ltd.