Does Institutional Similarity Necessarily Lead to Increased Bilateral Trade?

Vu Hong Van (), Nguyen Thi Thanh Huyen () and Nguyen Khanh Doanh
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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

Journal of International Commerce, Economics and Policy (JICEP), 2022, vol. 13, issue 02, 1-25

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.

Keywords: Institutional similarity; institutional quality; bilateral trade; system-GMM (search for similar items in EconPapers)
JEL-codes: F13 F14 F16 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S1793993322500053

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