Financial development gap, institutional distance and international cooperation on production capacity

Using a sample of 167 countries (regions) from 2007 to 2019, this paper examines the impact of financial development gap and institutional distance on the international cooperation on pro-duction capacity. We use two-way fixed effect and threshold models to explore this issue between China and the other countries (regions). We conclude that both financial development gap and institutional distance can inhibit international capacity cooperation, and this effect is more pronounced in middle-income countries and the Belt and Road countries. This finding is robust after a series of robustness checks. Furthermore, institutional distance has a threshold effect on the impact of financial development gap on the international cooperation on production capacity.