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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 ()

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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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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1898.

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

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Related research
Keywords: gravity approach WTO monopolistic competition real trade costs

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

References listed on IDEAS
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  1. Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Blackwell Publishing, vol. 13(4), pages 682-698, 09. [Downloadable!] (restricted)
    Other versions:
  2. Richard Baldwin, 1988. "Hysteresis In Import Prices: The Beachhead Effect," NBER Working Papers 2545, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Paul Krugman, 1991. "The move toward free trade zones," Economic Review, Federal Reserve Bank of Kansas City, issue Nov, pages 5-25. [Downloadable!]
  4. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July. [Downloadable!] (restricted)
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  5. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March. [Downloadable!] (restricted)
    Other versions:
  6. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March. [Downloadable!] (restricted)
    Other versions:
  7. Paul Krugman, 1991. "The move toward free trade zones," Proceedings, Federal Reserve Bank of Kansas City, pages 7-58.
  8. 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. [Downloadable!] (restricted)
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  9. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  10. 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. [Downloadable!] (restricted)
  11. Arvind Subramanian & Shang-Jin Wei, 2003. "The WTO Promotes Trade, Strongly but Unevenly," IMF Working Papers 03/185, International Monetary Fund. [Downloadable!]
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  12. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November. [Downloadable!] (restricted)
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  13. Gabriel J. Felbermayr & Wilhelm Kohler, 2006. "Exploring the Intensive and Extensive Margins of World Trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(4), pages 642-674, December. [Downloadable!] (restricted)
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  14. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, 09. [Downloadable!] (restricted)
    Other versions:
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