Discussion Paper

No. 2019-57 | November 11, 2019
Impact of institutional and cultural distance on ASEAN’s trade efficiency

Abstract

This paper aims to analyze the impact of institutional and cultural distance on ASEAN’s trade efficiency using bilateral trade data from 2006 to 2016. The authors first employ an improved version of the stochastic frontier model to control endogeneity in estimating efficiency scores and then apply a sys-GMM model to estimate the impact of various distances on trade efficiency. The major findings are summarized as follows: first, trade efficiency of ASEAN’s with the rest of the world is moderate, ranging from 0.48 to 0.60, and shows a downward trend. This indicates that considerable trade potential exists between ASEAN countries and the rest of the world. Second, institutional and cultural distance negatively affects ASEAN’s trade efficiency. Third, trade freedom is an important factor that positively influences ASEAN’s trade efficiency. Based on these findings, this study concludes that efforts to reduce differences in institutions and culture and to promote trade liberalization are strongly suggested as remedies for ASEAN countries to turn potential trade performance into actual trade performance.

Data Set

  • data2.tab
    [text/tab-separated-values, 493K]

JEL Classification:

F14, C55, F15

Assessment

  • Downloads: 258

Links

Cite As

Doanh Khanh Nguyen, Van Ngoc Thi Pham, and Yoon Heo (2019). Impact of institutional and cultural distance on ASEAN’s trade efficiency. Economics Discussion Papers, No 2019-57, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2019-57


Comments and Questions


Jungsuk Kim - Well written paper
November 13, 2019 - 08:51

Overall, well written paper with very interesting topic for the ASEAN countries' trade.
Only concern lies in the similarity between the variables of institutional distance, cultural distance and trade freedom. They can be highly correlated each other.
And because these variables are all indexes, there can be scaled disparity between ...[more]

... sub-components thus averaging them could lead some problem which should be clarified.
As for the Stochastic frontier estimation, suggest to include some of the studies of Subal C. Kumbhakar such as "Estimation of Technical Efficiency in Single Equation Panel Models.


Anonymous - Referee Report 1
December 12, 2019 - 15:33

See attached file


Inmaculada Martinez-Zarzoso - Referee Report 2
January 07, 2020 - 16:46

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Doanh Khanh Nguyen, Van Ngoc Thi Pham, and Yoon Heo - Reply to Referee Report 2 - short version
January 16, 2020 - 16:33

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Doanh Khanh Nguyen, Van Ngoc Thi Pham, and Yoon Heo - Reply to Referee Report 2 - long version
January 16, 2020 - 16:34

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Doanh Khanh Nguyen, Van Ngoc Thi Pham, and Yoon Heo - Reply to Referee Report 1-short version
January 16, 2020 - 16:44

see attached file


Doanh Khanh Nguyen, Van Ngoc Thi Pham, and Yoon Heo - Reply to Referee Report 1 - long version
January 16, 2020 - 16:46

see attached file