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The WTO Trade Effect

  • Pao-Li Chang¤
  • Myoung-Jae Lee

This paper proposes to reexamine the trade effect of GATT/WTO based on non-parametric econometric techniques. Our estimation framework uses the simplest gravity model that explains bilateral trade volumes with country sizes and trade resistance, without imposing parametric assumptions typically made in gravity-type econometric models. Specifically, matching estimators coupled with permutation tests and signed-rank tests are employed to obtain point and interval estimates. While observable covariates (country sizes and determinants of trade resistance) are controlled for nonparametrically, unobservable selection bias is dealt with by a sensitivity analysis. The results suggest large GATT/WTO effects on trade in both cross-sectional and time-series dimensions, and the results hold regardless of the GATT/WTO indicators (defined by formal membership or de facto participation).

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File URL: http://degit.sam.sdu.dk/papers/degit_13/c013_027.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c013_027.

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Length: 46 pages
Date of creation: Nov 2008
Handle: RePEc:deg:conpap:c013_027
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