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WTO membership and the extensive margin of world trade: New evidence

Author

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  • Felbermayr, Gabriel
  • Kohler, Wilhelm K.

Abstract

Recent literature has argued that, contrary to the results of a seminal paper by Rose (2004), WTO membership does promote bilateral trade, at least for developed economies and if membership includes non-formal compliance. We review the literature in order to identify open issues. We then develop the simplest possible corner-solutions\" version of the gravity model which serves as a framework to readdress these issues. We focus on the extensive margin of trade that separates positive-trade from zero-trade country pairs. We argue that the model can be consistently estimated using Poisson pseudo-maximum-likelihood methods with exporter and importer fixed effects. We account for coding issues and the potential heterogeneity of the WTO membership which recent contributions have stressed. While we find that WTO membership increases the likelihood that a given country pair trades, we do not find that the extensive margin has a strong and systematic effect on the average trade-creating potential of the WTO.

Suggested Citation

  • Felbermayr, Gabriel & Kohler, Wilhelm K., 2009. "WTO membership and the extensive margin of world trade: New evidence," Munich Reprints in Economics 20606, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:20606
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    Cited by:

    1. Hogrefe, Jan & Jung, Benjamin & Kohler, Wilhelm K., 2010. "Readdressing the trade effect of the Euro: Allowing for currency misalignment," ZEW Discussion Papers 10-023, ZEW - Leibniz Centre for European Economic Research.
    2. Sören Prehn & Bernhard Brümmer & Stanley R. Thompson, 2015. "Payment decoupling and intra-European calf trade," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 42(4), pages 625-650.
    3. Jayjit Roy, 2014. "On the robustness of the trade-inducing effects of trade agreements and currency unions," Empirical Economics, Springer, vol. 47(1), pages 253-304, August.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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