Institutional Distance, Neighboring Effects and Bilateral Trade:An Empirical Analysis Based on Spatial Panel Model of “One Belt and One Road” Countries

Xu Jiayun; Zhou Shaojie; Hu Angang

doi:doi:10.16538/j.cnki.jfe.2017.01.007

Abstract

Institution plays a decisive role in bilateral trade. This paper introduces the neighboring effect into traditional analytical model of the relationship between institution and trade for the first time, and applies spatial panel model to deeply investigate the effects of institutional distance and neighboring effect on bilateral trade between China and "One Belt and One Road" countries. The results show that the differences in culture, law, macro-economic system and micro-economic system between China and "One Belt and One Road" countries significantly inhibit the development of bilateral trade, and this inhibition role is more significant in the long term. The analysis further introducing neighboring effect shows that bilateral trade between China and "One Belt and One Road" countries is constrained by the trade between China and neighboring countries of "One Belt and One Road" countries, namely neighboring effect embodies competitive relationship. And whether for import trade or for export trade, institutional distances between China and "One Belt and One Road" countries strengthen the "competition" role of neighboring effect, but the role abovementioned differs widely in areas. Therefore, with the promotion of "One Belt and One Road" strategy, China needs to formulate related matching policies to balance China and "One Belt and One Road" countries, especially bilateral trade interests between China and these neighboring countries, to advance the sound development of the bilateral trade relationships between China and "One Belt and One Road" countries.