Author(s)

Mohammad Reza Lotfollahi Ghaffari

School of International Trade and Economics, University of International Business and Economics, Beijing, China.

The influence of cultural and institutional distance as intangible trade costs in the proportion of imports from China in the total import value of B & R countries is investigated in this research. Panel data from 2008 to 2019 was used at the total product level between China and the other 51 B & R countries’ import records. As the econometric method, an extended gravity model is used with the GEE estimation approach. Our findings show that institutional distance is more sensitive than cultural distance, hindering the proportion of China’s exports to B & R countries. Culture distance coefficient does not show high-level sensitivity to the proportion of import from China in the total import value of B & R countries. It suggests that China’s export is less affected by cultural distance. Moreover, the disparities in performance between European and Asian countries are investigated based on their proportion of imports from China in the total import value. As assumed, European countries’ proportion of imports from China is smaller than that of Asian countries. The effect of institutional distance on European countries’ proportion of imports from China is lower than that of Asian countries. The results of the generalized Wald’s statistic test reveal that European and Asian countries differ not only in the constant term, but also in how the main variables affect the proportion of imports from China. This entails differences in both intercept terms and non-constant variable coefficients. In addition, a dummy variable BRI is represented for the year before or after the BRI announcement to shed light on whether China’s export costs are depressed by it; our analysis reveals that the BRI announcement has implied an increase in the proportion of imports from China in the total import value of B & R countries. Furthermore, we find that the BRI has a positive interaction term that reduces the institutional distance inhibiting effect on China’s export to B & R countries.

Cultural and Institutional Distance, B & R’s Countries, Trade Costs and Proportion of Imports from China

Ghaffari, M. (2021) Evaluating the Effect of Cultural and Institutional Distance on the Proportion of B & R Countries’ Imports from China. Open Journal of Social Sciences, 9, 425-457. doi: 10.4236/jss.2021.912028.