The Role of Cultural and Institutional Distances in International Trade

Abstract

Despite the effectiveness of the observed barriers such as taxes and quotas to adjust bilateral trade, they are still not well supported by governments in general and the World Trade Organization in particular. Therefore, in recent years, unobserved barriers have been critical tools to modify the trade flows between nations worldwide. China’s exports account for a massive proportion of global trade. However, the role of cultural and institutional distance in China’s trade flow has not been much explored. This study analyzes the impact of cultural and institutional differences on China's exports between 2006-2017 by adopting a system-GMM estimator. The main findings are, first, that cultural and institutional differences between China and its trading partners reduce China's exports. Second, cultural and institutional distances have the strongest influence on China's exports to high-income countries, followed by low-income countries, and finally middle-income countries. Third, manufactured products are the most sensitive to cultural and institutional distances. Based on these findings, several policies for China, as well as for emerging economies in general, are suggested for reducing cultural and institutional distances and boosting their exports. Doi: 10.28991/ESJ-2023-07-02-015 Full Text: PDF

Cultural distance and bilateral trade: A transitional economy perspective

“…Cyrus (2015) also states that cultural distance reduces exports. Subsequent research conducted by Doanh et al (2022), Kristjánsdóttir et al (2020) and Long et al (2023) has provided more evidence supporting the adverse impact of cultural differences on the volume of trade between the two countries in various situations.…”

“…Researchers in international trade often argue that cultural distance reduces bilateral trade (Doanh et al, 2022;Liu et al, 2020;Long et al, 2023). Cultural disparities contribute to higher trade costs due to incomplete information , communication disparities (Zhang, 2023), uncertainty, and variations in religion and language (Lankhuizen & de Groot, 2016;Long et al, 2023). According to Gokmen (2017) and Sun, Li, and Wang (2023), as the cultural distance increases, it becomes increasingly difficult for both parties to comprehend the trading laws and regulations.…”

“…In literature, the gravity model is frequently used to analyze bilateral trade patterns and impediments (Anderson, 2011;Bernardini Papalia & Bertarelli, 2015). This model is more effective at comprehending international trade flows from an economic (Narayan & Nguyen, 2016), geographical (Hassan Khayat, 2019, cultural, and institutional perspective (Long et al, 2023). Tadesse and White (2017) used a modified gravity model to investigate how cultural distance influences trade flows, and found that trade decreases significantly.…”

“…Nonetheless, there is a dearth of literature that concurrently explores the effects of cultural distance on bilateral trade flows (Bobina et al, 2023;Doanh et al, 2022;Long et al, 2023;Query & Thompson, 2023). Particularly the impact of cultural distance on the trade of transitioning specially least developed to developing economies is rare (Liu et al, 2020;Messner, 2024;Salignac et al, 2021;Tokas & Deb, 2020).…”

Empowering for the “Belt and Road”: Teaching Applied Chinese as a Foreign Language at Guangdong Nongken University

“…The "Confucius Institute of Mahasarakham University (GKR Mekong River) Practice Base", the "Laos Tai Hua Savannakhet Staff Primary School (GKR)", and the "Cambodia GKR Chunfeng Co. 'Rubber Forest School' in Cambodia", along with other GKR schools located abroad, have garnered significant acclaim from local governments and residents. These institutions have played a crucial role in fostering cultural exchanges between China and ASEAN countries, as well as strengthening the emotional bonds between the people of China and ASEAN countries s (Long et al, 2023;Xiu & Li, 2023;Yang et al, 2021;Liu et al, 2019).…”