Does democracy drive income in the world, 1500-2000?

Using data for political regimes, income and human capital for a sample of 141 countries over the periods 1820–2000 and 1500–2000, this research examines the income and growth effects of democracy when human capital, among other key variables, is controlled for. Linguistic distance-weighted foreign democracy is used as an instrument for domestic democracy. Democracy is found to be a significant determinant of income and growth and the result is robust to various estimation methods and covariates. We find that a one-standard deviation increase in democracy is associated with a 44–98% increase in per capita income.