A Study On The Influence Of Institutional Distance On International Trade

Since China formally joined the World Trade Organization(WTO), it has made remarkable achievements in international trade, having a huge role in promoting our country’s economic development. While, we have entered the season of trade friction, when our country becomes strong in international trade. Nowadays, for China there are more and more investigations, technical trade barriers and green trade barriers, which have serious impacts on the development of China’s international trade.At present, although the scale of our country’s international trade is growing quickly, the relatively backward mode and structure of international trade is still not well improved. It is an important task for our country to transform the mode of the development of international trade to improve the development of our country’s economic. At the same time, international trade environment changes dramatically, and institution convergence plays a greater role on promoting the development of international trade. Promoting the area cooperation of economic and trade becomes an important measure for each country. Based on this, this paper takes institution distance as the breakthrough point, study its influence on international trade from the perspective of institutional economics, and carry on the empirical test.With the development of the theory of international trade and changes of international economic environment, the traditional international trade theory is increasingly difficult to explain the new phenomenon of international trade. The research of the impact of institution distance on international trade not only relies on the traditional international trade theory and institutional economics theory, but also does need the new-new international trade theory and institutional economics based on the adjustment of interests and game theory. Through analyzing these theories systematically, the base of this paper can be more stable and the research achievement can be more persuasive.In this paper, I class the generalized social institution as four groups:the political institution, the economic institution, the legal institution and the cultural institution, and analyze the positive impact and negative impact on international trade of political institution distance, economic institution distance, legal institution distance and cultural institution distance, making research perspectives more objective and comprehensive.International trade involves the production, distribution and sales. Human capital and technological innovations have a key role on production, and transaction costs is an important factor affecting distribution, while consumer preference is a key factor affecting sales. Through the above four paths, the impacts of institution distance on international trade conduct to the trade scale, structure, comparative advantage and trade gains.For a long time, scholars focus on problems such as increasing transaction costs and trade friction caused by institution distance. They mainly study the constraint mechanism of institution distance to international trade, while they rarely study the incentive mechanism and coordination mechanism. This paper comprehensively analyzes the influence mechanism of institution distance to international trade from three perspectives, highlights the incentive effect of institutional distance on the development of international trade, and emphasizes the coordinating role of institution convergence on international trade formed by institution friction.Benefit maximization is the ultimate goal of economic participants to pursue, also the fundamental power of institution distance to affect international trade. While, in the real world, it is difficult to achieve the benefit maximization. In fact, "pareto suboptimal" is more common. As much as possible to achieve pareto optimality, and realize benefit maximization, the adjustment of interest and gaming play a huge promoting role. It’s an important driving force that institution distance affects international trade.Based on the above analysis of the positive influence and negative influence of institution distance on international trade, this paper uses the panel threshold regression method to do the empirical analysis, choosing the panel data from 1996 to 2012. Results show that, the political institution distance and legal institution distance have a "U" shaped relationship with international trade, while the economic institution distance and cultural institution distance have a inverted "U" shaped relationship with international trade.