Modelling the Extensive Margin of World Trade: New Evidence on GATT and WTO Membership
AbstractRecent literature has argued that, contrary to the results of a seminal paper by Rose (2004), General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) membership does promote bilateral trade, at least for developed economies and if membership includes non-formal compliance. We review the literature to identify open issues. We then develop a simple extension of the gravity model that gives rise to an extensive country margin of trade separating positive trade from zero trade country pairs. The model is used to identify WTO membership effects at both the intensive and the extensive margins. Empirical estimation of this model, based on Poisson pseudo‐maximum likelihood methods with exporter and importer fixed effects, allows us to readdress the empirical issue of whether GATT/WTO membership does or does not promote trade. We find that GATT membership was successful on the extensive margin of world trade but not on the intensive margin. For the recent WTO episode (1995–2008), we find consistent and robust evidence for a substantial trade‐creating role of membership which is driven primarily by the intensive margin. WTO membership results in higher bilateral trade of about 40 per cent.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal The World Economy.
Volume (Year): 33 (2010)
Issue (Month): 11 (November)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Prehn, Soren & Brummer, Bernhard, 2011. "Estimation Issues in Single Commodity Gravity Trade Models," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114776, European Association of Agricultural Economists.
- Wilhelm Kohler, 2010. "Das Spannungsfeld von Protektion, Liberalisierung und Freihandel," FIW Policy Brief series 008, FIW.
- Prehn, Soren & Brummer, Bernhard, 2011. "Estimation Issues In Single Commodity Gravity Trade Models," 51st Annual Conference, Halle, Germany, September 28-30, 2011 114524, German Association of Agricultural Economists (GEWISOLA).
- Prehn, Sören & Brümmer, Bernhard, 2011. "Estimation issues in disaggregate gravity trade models," DARE Discussion Papers 1107, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.