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This paper investigates the impact of violent civil conflicts during the process of democratization on the institutional quality of the emerging democracies. We propose a theory of endogenous regime transition in which violent conflict can arise in equilibrium. Peaceful transitions lead to a social contract that provides all groups with political representation and leads to better protection of civil liberties than violent transitions. Empirical evidence from the third wave of democratization based on a difference-in-difference methodology supports the theoretical predictions. The findings suggest that, compared to peaceful transitions, violent conflicts during the democratic transition have persistent negative effects on the institutional quality of the emerging democracies.