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Does the GATT/WTO promote trade? After all, Rose was right

Author

Listed:
  • Silviano Esteve-Pérez

    (University of Valencia and Inteco Research Unit)

  • Salvador Gil-Pareja

    (University of Valencia and Inteco Research Unit
    Departamento de Estructura Económica)

  • Rafael Llorca-Vivero

    (University of Valencia and Inteco Research Unit)

Abstract

This paper re-examines the effect of the GATT/WTO on trade using recent econometric developments that allow us estimating structural gravity equations with the Poisson pseudo-maximum likelihood (PPML) estimator on a large dataset that requires computing high-dimensional fixed effects. By doing so, we overcome computational limitations that are present in previous studies. In line with Rose’s (Am Econ Rev 94:98–114, 2004) seminal work, we find that, unlike regional trade agreements and currency unions, the GATT/WTO accession has not generated positive trade effects. This result is robust to the use of alternative measures of trade flows, across periods and country groups, to changes in the periodicity of the data, when taking into account the GATT/WTO accession dynamics, to controlling for the participation of only one country of the dyad in GATT/WTO, to the consideration of non-member participants, and to the use of alternative datasets. Notwithstanding, we also find that PPML results are sensitive to the definition of the dependent variable.

Suggested Citation

  • Silviano Esteve-Pérez & Salvador Gil-Pareja & Rafael Llorca-Vivero, 2020. "Does the GATT/WTO promote trade? After all, Rose was right," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(2), pages 377-405, May.
  • Handle: RePEc:spr:weltar:v:156:y:2020:i:2:d:10.1007_s10290-019-00367-w
    DOI: 10.1007/s10290-019-00367-w
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    More about this item

    Keywords

    GATT/WTO; Trade; Gravity model; PPML; High-dimensional fixed effects;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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