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The WTO Trade Effect

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  • Pao-Li Chang¤
  • Myoung-Jae Lee

Abstract

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).

Suggested Citation

  • Pao-Li Chang¤ & Myoung-Jae Lee, 2008. "The WTO Trade Effect," DEGIT Conference Papers c013_027, DEGIT, Dynamics, Economic Growth, and International Trade.
    • Handle: RePEc:deg:conpap:c013_027
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    More about this item

    Keywords

    GATT/WTO; treatment effect; matching; permutation test; signed-rank test; sensitivity analysis;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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