Embedded Files
Using a nonlinear dynamic factor model, we find that there exist multiple institutional clubs within China, three rather small clubs which follow an above-average high institutional quality path and two clubs which find themselves on a relatively low institutional quality path.
Figure 1: Transition paths for institutional clubs.
Source: Own calculation based on data of Fan et al. (2010). Note: The relative transition path of the club is defined as the cross-section mean of the members of club divided by the cross-section mean of the whole sample.
Various members of the poor institutional clubs are additionally caught in a low-income trap.
Figure 2: Spatial distribution of convergence clubs in income and institutional quality.
Source: National Bureau of Statistics of China. Note: The map depicts Mainland China. Tibet is excluded from our analysis due to missing data.
Source: Fan et al. (2010). Note: The map depicts Mainland China. Tibet is excluded from our analysis due to missing data.
With the help of a recursive bivariate probit model, we show that institutional traps are important determinants of income traps, giving rise to the recently identified phenomenon of a ‘double trap’.
Human capital and urbanization are additional important determinants of income traps, while globalization is decisive for avoiding poor institutional traps.
Page updated
Google Sites
Report abuse