TITLE:
Evaluating the Effect of Cultural and Institutional Distance on the Proportion of B & R Countries’ Imports from China
AUTHORS:
Mohammad Reza Lotfollahi Ghaffari
KEYWORDS:
Cultural and Institutional Distance, B & R’s Countries, Trade Costs and Proportion of Imports from China
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.9 No.12,
December
31,
2021
ABSTRACT: 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.