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Does Institutional Similarity Necessarily Lead to Increased Bilateral Trade?

Author

Listed:
  • Vu Hong Van

    (University of Finance - Marketing, Ho Chi Minh City, Vietnam)

  • Nguyen Thi Thanh Huyen

    (TNU-University of Economics and Business Administration, Thai Nguyen University, Thai Nguyen City, Vietnam)

  • Nguyen Khanh Doanh

    (International School, Thai Nguyen University, Thai Nguyen City, Vietnam)

Abstract

To shed light on the question of whether or not institutional similarity always increases bilateral trade, we divide institutional quality into the low level (one standard deviation below the mean), medium level (in between minus one and one standard deviation from the mean), and high level (one standard deviation above the mean). By applying the system-GMM estimator, we found that the institutional similarity between the two countries has a trade-boosting effect, except in cases where one or both countries have low-institutional quality. These imply that measures to enhance institutional similarity must be accompanied by policies to promote institutional adaptability.

Suggested Citation

  • Vu Hong Van & Nguyen Thi Thanh Huyen & Nguyen Khanh Doanh, 2022. "Does Institutional Similarity Necessarily Lead to Increased Bilateral Trade?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 13(02), pages 1-25, June.
    • Handle: RePEc:wsi:jicepx:v:13:y:2022:i:02:n:s1793993322500053
    DOI: 10.1142/S1793993322500053
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    Citations

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    Cited by:

    1. Wang Zhou & Shuyue Xia & Jinglei Ye & Na Zhang, 2024. "How Do International Contractors Choose Target Market Based on Environmental, Social and Governance Principles? A Fuzzy Ordinal Priority Approach Model," Sustainability, MDPI, vol. 16(3), pages 1-18, January.

    More about this item

    Keywords

    Institutional similarity; institutional quality; bilateral trade; system-GMM;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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