The 'Double Trap' in China: Multiple Equilibria in Institutions and Income and their Causal Relationship

While institutions are said to be poor in China in cross-country comparison, recent research indicates that at the provincial level, institutional quality plays in fact an important role for the economic success of a province, municipality, or autonomous region in China. Our paper aims to add further arguments to this discussion by focusing on the concept of club convergence. In particular, we analyze whether institutional quality in low-income provincial-level administrative divisions converges to the level experienced by relatively highly developed ones, or whether there exist multiple institutional clubs over the period 1997–2007, by using the log t test proposed by Phillips and Sul (2007).

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