There is wide agreement among academics and policy makers that democracy is a universal value---it brings with it a more secure, stable and prosperous society. One should therefore try to identify causes of democracy. In this thesis I study the short term effect of economic growth on changes in democracy. A quick glance at data tells us that wealthy countries are democratic, and common wisdom suggests these countries are democratic because of their wealth. The main contribution of my thesis is to question this view. I make progress to existing literature by taking time series persistence and simultaneity issues in the data into account. Formal tests are established, and they suggest that both problems are present. I therefore first difference the data and use an instrument variable approach during estimation. The econometric framework provides a couple of interesting results. First, once time series persistence is accounted for, the estimated effect of income on democracy changes from positive to negative and statistically significant. Second, when economic growth is instrumented the point estimate drops even further, making it quantitatively important as well. These findings might be important for policy making, as they imply that one should be careful when designing money transfers to poor countries.