Search results

Culture and institutions are among the essential sources of comparative advantage in international trade and may influence a country's FDI influx. This paper aims to analyze the impact of cultural distance (CD) and institutional distance (ID) on the efficiency of China's outward foreign direct investment (OFDI) for the panel of 43 countries during 2003–2016.

The stochastic frontier approach (SFA) has been incorporated into the standard gravity model of gravity Kalirajan, 1999; Ravishankar and Stack, 2014). SFA has traditionally been implemented to evaluate the production frontier as the highest yield that could possibly be generated from specified input levels. The production process is viewed to be fully efficient if the real output is performed at frontier level. Otherwise, the production process is assumed technically inefficient, which implies potential scope for enhanced output. This error term is split into two parts, a non-negative term and more standard asymmetrical term. The former identifies inefficiencies in production, while the latter retrieves random disorders

The outcomes assert a U-shaped relationship between CD and the efficiency of China's OFDI. Put differently, when the CD is minimal, the “liability of foreignness” (LOF) effect plays a dominant role; and CD tends to reduce the efficiency of China's OFDI. On the flip side, when the culture distance is greater than a certain threshold level, the “advantages of foreignness” (AOF) effect plays a predominant role, and CD improves the efficiency of China's OFDI. Institutional distance results in the “LOF” effect significantly reduce the efficiency of China's OFDI.

Notwithstanding these contributions, our study has some limitations which offer directions for future research. The major limitation of this research work is the availability of comprehensive data for a well extended time, in particular for the variable of CD. Further, a firm-level study can shed light on the motivations and performance of China OFDI. Finally, given that our analysis focuses on emerging market multinational enterprises (EMNEs) from China, the findings might not be explicitly generalizable to MNEs from other developing countries. Future studies should concentrate on the comparative study of China's OFDI with other developing countries, to deepen our understanding of the effects of ID and CD on the efficiency of OFDI.

(1) The work is novel in nature as the authors attempt to explore the effect of ID and CD on efficiency of Chinese FDI. To the best of the authors’ knowledge, no research is conducted in this direction in terms of Chinese FDI. (2) Further, the prior studies employed standard gravity model, which may not correctly evaluate the trade potential viewed as the highest potential value. To overcome the shortcomings of the standard gravity model in estimation of the trade performance and efficiency, the SFA has been incorporated into the standard gravity model of gravity.

The purpose of this paper is to estimate the China’s outward FDI efficiency and it determinants in 69 countries along the Belt and Road over the period of 2003-2013.

This paper defines the extent of the Belt and Road in terms of geographical boundaries, justifying the application of the stochastic frontier gravity model to the FDI analysis, and then constructing a frontier regression model to assess the China’s outward FDI efficiency and it determinants in countries along the Belt and Road.

Regarding the core gravity parameter estimates, China’s outward FDI was highly consistent with the gravity model. As far as policy parameters are concerned, China’s outward FDI was significantly restricted by some man-made barriers in host countries. According to the estimated FDI efficiency scores, China has huge outward FDI potential in countries along the Belt and Road. In general, China’s outward FDI efficiency demonstrated a consistent uptrend from the perspectives of both FDI flows and stocks over the period of 2003-2013. Although China’s outward FDI performance indicated a very uneven pattern across different countries and periods, there were no significant performance differences between the Road and Belt.

The Belt and Road initiative can be largely beneficial to China’s outward FDI, but the specific framework of cooperation should be designed on the basis of determinants of China’s outward FDI. The regional cooperation with the Road countries should mainly focus on the removal of business barriers and financial barriers. The regional cooperation with the Belt countries should mainly concern the improvement of local intellectual property protection, the reduction of local tax burden, and removal of business barriers and financial barriers.

To the authors’ best knowledge, no existing literature has specifically examined the efficiency of China’s outward FDI in the countries along the Belt and Road and its determinants.

The paper aims to estimate the factors affecting Vietnam's export in rice and coffee, the two most important agricultural products, especially in exploring the role of “behind-the-border” constraints.

The paper applies the stochastic frontier gravity model, which models the aggregate effect of “behind-the-border” factors for Vietnam's export in rice and coffee.

The paper finds that the impact of “behind-the-border” constraints is statistically significant, suggesting that Vietnam's exports in rice and coffee may be prevented from reaching their export potential by such factors. Moreover, technical efficiency and potential export suggest that Vietnam has a lot of potential to increase its exports in rice and coffee with its major trading partners. The Association of Southeast Asian Nations group continues to be the major market of Vietnamese rice and coffee. Vietnam can also take advantage of the opportunity to export these commodities to the European Union (EU) (not including the UK), and Comprehensive and Progressive Agreement for Trans-Pacific Partnership, especially in coffee to the EU.

The study cannot identify specific “behind-the-border” factors due to the limitation of data availability.

Many existing studies suggest that export in agricultural products of Vietnam, especially in rice, is significantly affected by natural factors and “explicit beyond-the-border” constraints. They ignore the impact of “behind-the-border” constraints in Vietnam and its trading partners. My study proved the significant impact of such constraints. Therefore, Vietnam needs more policies to remove the “behind-the-border” constraints to promote export in rice and coffee.

Given the current global climate change concerns, environmental goods (EGs) exported from developing countries have been declining in recent years despite the growing economic importance of these nations. Researchers believe that the problem lies in the nature of technology and border-related constraints.

This research work considers a relatively modern approach known as the “stochastic frontier gravity-type model” to examine opportunities and challenges involving Bangladesh EGs exports.

It is evident that Bangladesh, despite its close links to the other East Asian economies, has not realized the true potential of EGs exported between 2001 and 2015.

This study highlights the removal of border-related constraints that will improve the country’s exports. The findings will make it possible to explain the constraints of the export of environmental goods.

This paper aims at assessing the impact of institutional and cultural distances and trade barriers on ASEAN's trade efficiency using a panel data set of 65 countries for the period 2006–2017.

First, the authors applied an improved version of the stochastic frontier model to estimate the trade efficiency scores. After that, we used the system generalized method of moment (GMM) estimator to investigate the impacts of institutional and cultural distances on ASEAN's trade efficiency.

The results show that the trade efficiency of ASEAN countries with the rest of the world (ROW) is moderate, ranging from 0.561 to 0.612, but shows a downward trend. This result indicates that considerable trade potential exists between ASEAN countries and ROW. Institutional and cultural distances, as well as the trade barriers, negatively affect ASEAN's trade efficiency. Efforts to reduce differences in institutions and cultures and to promote trade liberalization are vital remedies for ASEAN countries to turn potentials into actual trade performance.

This study contributes to the existing literature in three different ways. First, this is the first study on the impact of the differences between internal and external characteristics on trade efficiency, specifically, the impact of institutional and cultural distances on ASEAN's trade efficiency. Second, to obtain accurate efficiency scores, the authors use an improved version of the stochastic frontier model proposed by Karakaplan (2018), which can control the problem of endogeneity. Third, in quantifying the determinants of trade efficiency, the authors apply a system GMM estimator, which allows us to overcome the problems of endogeneity, measurement errors, and omitted variables.

Most economic growth is concentrated in the eastern and coastal provinces of China, while the western and central provinces have not yet experienced the expected economic growth. This study aims to address the following crucial research questions: Do the central and western provinces achieved potential efficiency in economic growth? Have China’s provinces used their resources effectively in implementing economic growth strategies?

The research design concerns the use of a panel dataset on province-specific economic growth in China over the years to 2000–2020. The methodology used was a stochastic frontier gross domestic product (GDP) model with time-varying technical efficiency over time. The approach uses the existing literature to identify the important variables influencing economic growth at the provincial level to model the stochastic frontier GDP model for empirical analysis.

This study concludes that the central provinces show the highest rate of efficiency in economic growth, though not 100%, followed by the Eastern and Western provinces. By increasing and improving skilled education institutes and intensifying supply chain opportunities through foreign direct investment (FDI), the central provinces achieving 100% growth efficiency may not be ruled out.

The modes of economic governance and policies to improve GDP growth have been rapidly changing from increasing incentives to improving competition. Thus, more unique avenues and expansion of the horizon for impending research on provincial, national and international macroeconomics would emerge that would make current methodologies of the growth analysis outdated.

The empirical analysis highlights the importance of improving skilled education institutes and intensifying supply chain opportunities through FDI for achieving sustained economic growth.

The empirical analysis facilitates finding ways to reduce income inequality across provinces in China.

To the authors' knowledge empirical analysis examining the Chinese province-specific economic growth efficiency explicitly has not been carried out using the recent Chinese panel dataset.

The purpose of this paper is to investigate the major determinants of China’s outward foreign direct investment (OFDI) in the economies along the “Belt & Road” Initiative (BRI afterward). China works on to advance the agenda of the BRI both at home and abroad. The BRI is set up to promote connectivity in five key areas: policy coordination, infrastructure connectivity, trade facilitation, financial cooperation and people-to-people contacts.

The existing literature is inconclusive with regards to the motives, patterns and determinants of the Chinese OFDI. The authors are, therefore, motivated to undertake this study to shed some new light on the influencing factors of the Chinese OFDI. The authors have made a unique data set that consists of China and its 64 partnering countries of the BRI over a time period of 12 years spanning from 2004 to 2015. This time period is chosen on the chief consideration of data availability. The authors have a balanced panel, and applied the gravity model in line with the theoretical arguments and econometric developments.

The paper assumes that China’s OFDI along the BRI was a function of gross domestic product (GDP), income per capita, distance and WTO. The findings showed that GDP, per capita income and distance were the key determinants of the OFDI. China’s entry into the WTO did not strongly affect the OFDI. China maintained a tradition of historical relationships along the BRI economies. After all, China is relocating its investment resources in line with the consideration of its partnering countries’ economic size, cross-border distance and per capita income.

This study is the first of its kinds to analyze the determinants of OFDI by means of gravity model. The authors have covered all the countries along the BRI. Hence, this paper aims to make a substantial contribution to the literature, both from a scientific and a policy perspective.

Although India is seen as a key player in the global economy, it is still below its potential level of growth. In this age of globalism, integration with the global economy through trade and foreign investments fosters domestic growth. For India, although this integration has strengthened over the years, there are certain gaps that remain to be addressed. Though numerous studies in the literature have tried to find answers to these questions, an important aspect that has not been considered by these studies relates to India’s federal structure and the role of states in determining the aggregate economic outcome. As Foreign Direct Investment (FDI) inflows to India are concentrated in a few states, this paper aims to provide an assessment of the reasons behind this trend.

This paper aims to investigate the reasons behind the interstate differences with respect to FDI inflows in India. The analytical work undertaken for this paper is based on secondary data, collected and collated from various sources. The approach adopted for this paper includes a heat graph analysis to examine whether there is a clear pattern in terms of the state-specific factors for high FDI states versus the low FDI states. This data analysis is followed by an econometric estimation to gauge the impact of state-specific factors in determining the FDI inflows.

As per the secondary data–driven heat graph and econometric analysis, factors like industrial output, social sector expenditure, judicial quality, connectivity indicators, labor cost and availability of credit, act as differentiators between high and low FDI-receiving states. It then becomes imperative to bridge the gap between the two sets of states in terms of these specific factors. Implementation and success of policy interventions can only be derived at the state level and therefore needs more decentralized approach.

This paper tries to identify the reasons that are responsible for FDI inflows being concentrated in a few Indian states. This involves a comprehensive analysis of several variables to understand whether there is a clear pattern where high-FDI states are also in a better position with respect to these attributes. This effort to factor in the federal aspect of a macroeconomic indicator like FDI provides new dynamic to this area of work.

The main purpose of this paper is to analyse the different factors affecting Sino-African trade based on the gravity model, and propose some solutions to improve the problems.

The paper is based on an extended gravity model, including trade agreement and recession as explanatory variables. The impacts of trade agreement and economic recession on Sino-African imports and exports are examined.

The results show that the product of GDP affects African exports to China significantly and negatively, and affects African imports from China positively. Real exchange rate affects African exports to China positively, and affects African imports from China negatively. Population affect African exports to China significantly and positively, and affect African imports from China positively. Recession have negative effects on both African imports from China and exports to China but is only significant for imports. Agreement affects African imports from China and exports to China positively. Our findings confirm the impact of economic recession, and imply that the structure of African product exported to China should be improved, and trade agreements should be reinforced.

This paper contributes and extends the literature on Sino-African trade by improving the traditional gravity model to include the impact of all trade agreements, and their aggregating effects on trade. The paper also seeks to assess the trade impact of economic recession through a dynamic gravity model approach for which there has been no research done to our knowledge. In this regard, it provides new understanding of the trade pattern between China and Africa, and ways in improving the Sino-African bilateral trade.

In this chapter, we utilize the residual concept of productivity measures defined in the context of normal-gamma stochastic frontier production model with heterogeneity to differentiate productivity and inefficiency measures. In particular, three alternative two-way random effects panel estimators of normal-gamma stochastic frontier model are proposed using simulated maximum likelihood estimation techniques. For the three alternative panel estimators, we use a generalized least squares procedure involving the estimation of variance components in the first stage and estimated variance–covariance matrix to transform the data. Empirical estimates indicate difference in the parameter coefficients of gamma distribution, production function, and heterogeneity function variables between pooled and the two alternative panel estimators. The difference between pooled and panel model suggests the need to account for spatial, temporal, and within residual variations as in Swamy–Arora estimator, and within residual variation in Amemiya estimator with panel framework. Finally, results from this study indicate that short- and long-run variations in financial exposure (solvency, liquidity, and efficiency) play an important role in explaining the variance of inefficiency and productivity.