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The WTO Trade Effect

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  • Pao-Li Chang

    ()
    (School of Economics, Singapore Management University)

  • Myoung-Jae Lee

    ()
    (Department of Economics, Korea University)

Abstract

Rose (2004) showed that the WTO or its predecessor, the GATT, did not promote trade, based on conventional econometric analysis of gravity-type equations of trade. We argue that conclusions regarding the GATT/WTO trade effect based on gravity-type equations are arbitrary and subject to parametric misspecifications. We propose using nonparametric matching methods to estimate the `treatment effect' of GATT/WTO membership, and permutation-based inferential procedures for assessing statistical significance of the estimated effects. A sensitivity analysis following Rosenbaum (2002) is then used to evaluate the sensitivity of our estimation results to potential selection biases. Contrary to Rose (2004), we find the effect of GATT/WTO membership economically and statistically significant, and far greater than that of the Generalized System of Preferences (GSP).

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Bibliographic Info

Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 06-2007.

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Length: 40 pages
Date of creation: Sep 2007
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:06-2007

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Keywords: GATT/WTO; GSP; treatment effect; matching; permutation test; signed-rank test; sensitivity analysis;

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References

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Citations

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Cited by:
  1. Wilhelm Kohler & Gabriel Felbermayr, . "WTO Membership and the Extensive Margin of World Trade: New Evidence," Discussion Papers 09/06, University of Nottingham, GEP.
  2. Pao-Li Chang & Myoung-Jae Lee, 2007. "The WTO Trade Effect," Working Papers 06-2007, Singapore Management University, School of Economics.
  3. Hur, Jung & Park, Cheolbeom, 2012. "Do Free Trade Agreements Increase Economic Growth of the Member Countries?," World Development, Elsevier, vol. 40(7), pages 1283-1294.
  4. Aliyev, Khatai, 2014. "Expected Macroeconomic Impacts of the Accession to WTO on Azerbaijan Economy: Empirical Analysis," MPRA Paper 55096, University Library of Munich, Germany.
  5. Jayjit Roy, 2010. "On the Robustness of the Trade-Inducing Effects of Trade Agreements and Currency Unions," Working Papers 10-09, Department of Economics, Appalachian State University.
  6. Tristan Kohl & Steven Brakman & Harry Garretsen, 2013. "Do Trade Agreements Stimulate International Trade Differently? Evidence from 296 Trade Agreements," CESifo Working Paper Series 4243, CESifo Group Munich.
  7. Hayakawa, Kazunobu & Kimura, Fukunari, 2014. "How do free trade agreements reduce tariff rates and non-tariff barriers?," IDE Discussion Papers 446, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  8. Theo S. Eicher & Christian Henn, 2009. "In Search of WTO Trade Effects," IMF Working Papers 09/31, International Monetary Fund.
  9. Juyoung Cheong & Do Won Kwak & Kam Ki Tang, 2013. "WTO Trade Effects and Identification Problems: Why Knowing The Structural Properties of WTO Memberships Matters?," Discussion Papers Series 491, School of Economics, University of Queensland, Australia.
  10. 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.
  11. Hayakawa, Kazunobu, 2012. "Impacts of FTA utilization on firm performance," IDE Discussion Papers 366, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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