Socio-Economic Transitions

Prof. Dr. Erich Gundlach

Prof. Dr. Martin Paldam, School of Economics and Management, Aarhus University, Denmark



Research Questions
The research hypothesis is that many socio-economic and political transitions are primarily driven by a common factor, namely a persistent growth rate of per capita income. At the same time, it is obvious that all transitions also, in turn, affect the underlying growth rate of income. The basic challenge of this research agenda is twofold. First, we need to develop a framework that can help clarify how a given long-run growth rate simultaneously affects the transitions under consideration. From a theoretical point of view, such a framework separates correlation from causality. Second, we need to empirically identify the potential two-way causalities between the long-run growth rate and the various transitions.

Contribution to International Research
The research project deals with recent hypotheses that challenge modernisation theory, such as the hypothesis of the primacy of institutions advanced by Acemoglu, Johnson, and Robinson (see their survey article in the Handbook of Economic Growth 2005) or the supply-side theory of religiosity advanced by Iannacone and co-authors. Research results are expected to be published in internationally renowned journals. Research results are expected to be published in internationally renowned journals such as Kyklos, European Journal of Political Economy, Public Choice, and World Bank Economic Review.

Research Design and Methods The project addresses three topics. (1) It will consider the transition of education from a traditional low-level equilibrium to a modern high-level equilibrium, and will focus on the ambivalent role of education as a consequence and a determinant of long-run growth. (2) From a theoretical perspective, it will also consider how previously identified transition variables such as democracy and religiosity interact with each other in the process of long-run development. (3) Finally, it will consider whether the recent empirical model that has been used to claim that there is no democratic transition is likely to produce biased estimates, also when applied to other transitions. The methods the project will use include general equilibrium analysis, regression analysis, and simulation studies.

Preliminary Results
The researcher’s work on the religious transition has been accepted for publication in Public Choice and in Theoretical Economics Letters. These papers show that there is robust empirical evidence for a fall in religiosity as a result of rising levels of income. The estimated transition parameter can be related to a model of the religious transition that emphasises the substitution of scientific knowledge for religious beliefs as the engine of long-run growth.