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Does WTO Membership Make a Difference at the Extensive Margin of World Trade?

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Author Info

  • Gabriel J. Felbermayr
  • Wilhelm Kohler

Abstract

In his seminal paper, Rose (2004) concluded from a gravity-type study of bilateral trade that the GATT/WTO does not play a strong role in encouraging trade. Rose looks at countries where the amount of trade was positive to start with (intensive margin). In this paper, we present a corner-solutions version of the gravity model of bilateral trade which explains zero trade and leaves room for WTO membership to promote trade at the extensive margin of trade. Relying on a Tobit estimation approach, we find that WTO membership has promoted world trade to a larger extent than Rose’s results seem to indicate.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-01/cesifo1_wp1898.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1898.

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Date of creation: 2007
Date of revision:
Handle: RePEc:ces:ceswps:_1898

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Related research

Keywords: gravity approach; WTO; monopolistic competition; real trade costs;

References

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  1. Paul Krugman, 1991. "The move toward free trade zones," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-58.
  2. Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 682-698, 09.
  3. Andrew K. Rose, 2002. "Do WTO Members have More Liberal Trade Policy?," NBER Working Papers 9347, National Bureau of Economic Research, Inc.
  4. Xuepeng Liu, 2009. "GATT/WTO Promotes Trade Strongly: Sample Selection and Model Specification," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 428-446, 08.
  5. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
  6. Felbermayr, Gabriel, 2006. "Exploring the Intensive and Extensive Margins of World Trade," Munich Reprints in Economics 20646, University of Munich, Department of Economics.
  7. Andrew K. Rose, 2002. "Do We Really Know that the WTO Increases Trade?," NBER Working Papers 9273, National Bureau of Economic Research, Inc.
  8. Santos Silva, Joao & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers 5311, C.E.P.R. Discussion Papers.
  9. Kyle Bagwell & Robert W. Staiger, 2004. "The Economics of the World Trading System," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524341, December.
  10. Baldwin, Richard, 1988. "Hyteresis in Import Prices: The Beachhead Effect," American Economic Review, American Economic Association, vol. 78(4), pages 773-85, September.
  11. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  12. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
  13. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  14. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  15. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2003. "A generalized design for bilateral trade flow models," Economics Letters, Elsevier, vol. 80(3), pages 391-397, September.
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Citations

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Cited by:
  1. Pao-Li Chang & Myoung-Jae Lee, 2010. "The WTO Trade Effect," Working Papers 31-2010, Singapore Management University, School of Economics.
  2. Richard Frensch, 2008. "Trade liberalisation, adoption costs, and import margins in CEEC and OECD trade," Working Papers 269, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  3. Rolf J. Langhammer, 2010. "Unordnung in der internationalen Handelsordnung: Befunde, Gründe, Auswirkungen und Therapien," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(1), pages 75-98, 02.
  4. Pham, Cong S. & Lovely, Mary E. & Mitra, Devashish, 2014. "The home-market effect and bilateral trade patterns: A reexamination of the evidence," International Review of Economics & Finance, Elsevier, vol. 30(C), pages 120-137.
  5. Sergio de Nardis & Carmine Pappalardo & Claudio Vicarelli, 2008. "The Euro adoption’s impact on extensive and intensive margins of trade: the Italian case," ISAE Working Papers 101, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  6. Buono, Ines & Lalanne, Guy, 2012. "The effect of the Uruguay round on the intensive and extensive margins of trade," Journal of International Economics, Elsevier, vol. 86(2), pages 269-283.
  7. Persson, Maria, 2010. "Trade Facilitation and the Extensive Margin," Working Paper Series 828, Research Institute of Industrial Economics.
  8. Christodoulopoulou, Styliani, 2010. "THE Effects of Multilateral Trade Liberalization on the Extensive and the Intensive Margins of Trade," MPRA Paper 29169, University Library of Munich, Germany.
  9. Persson, Maria, 2008. "Trade Facilitation and the Extensive and Intensive Margins of Trade," Working Papers 2008:13, Lund University, Department of Economics.
  10. Claudio, Vicarelli & Carmine, Pappalardo, 2012. "Euro introduction and export behaviour of Italian firms," MPRA Paper 43386, University Library of Munich, Germany.
  11. Theo S. Eicher & Christian Henn, 2009. "In Search of WTO Trade Effects," IMF Working Papers 09/31, International Monetary Fund.

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