Institutional Distance and Trade Cooperation: Empirical Evidence from India and its Partner Countries

Abstract

The present study analyses the effect of differences in government effectiveness, political stability, rule of law, voice and accountability, control of corruption and regulatory authority on bilateral trade. Based on the data collected for India and its trade partners over 24 consecutive years, the present study applies an augmented gravity model. The findings indicate that institutions at level and institutional distance play an important role in export promotion of India to these countries. Among the various institutional factors, voice and accountability, control of corruption and government effectiveness have considerable influence on exports from India. The study concludes that institutional quality needs to be improved further to enhance trade cooperation between these countries. JEL: F41, C5, C0, E0