The 'Double Trap' in China? - Key Findings
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.
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.
Human capital and urbanization are additional important determinants of income traps, while globalization is decisive for avoiding poor institutional traps.