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On the Heterogeneous Trade and Welfare Effects of GATT/WTO Membership

Author

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  • Felbermayr , Gabriel

    (Kiel Institute & Kiel University)

  • Larch, Mario

    (University of Bayreuth)

  • Yalcin, Erdal

    (Konstanz University of Applied Sciences)

  • Yotov, Yoto

    (School of Economics LeBow College of Business Drexel University)

Abstract

We build on the latest developments in the structural gravity literature to quantify the partial and general equilibrium effects of GATT/WTO membership on trade and welfare. Using an extensive database covering manufacturing trade for 186 countries over the period 1980-2016, we find that the average impact of GATT/WTO membership on trade among member counties is large, positive, and significant. We contribute to the literature by estimating country-specific estimates and find them to vary widely across the countries in our sample with poorer members benefiting more. Using these estimates, we simulate the general equilibrium effects of GATT/WTO on welfare, which are sizable and heterogeneous across members, and relatively small for non-member countries. We show that countries not experiencing positive trade effects from joining GATT/WTO can still gain in terms of welfare, due to beneficial terms-of-trade effects.

Suggested Citation

  • Felbermayr , Gabriel & Larch, Mario & Yalcin, Erdal & Yotov, Yoto, 2020. "On the Heterogeneous Trade and Welfare Effects of GATT/WTO Membership," School of Economics Working Paper Series 2020-12, LeBow College of Business, Drexel University.
  • Handle: RePEc:ris:drxlwp:2020_012
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    2. Chen, Natalie & Novy, Dennis, 2021. "Gravity and Heterogeneous Trade Cost Elasticities," The Warwick Economics Research Paper Series (TWERPS) 1385, University of Warwick, Department of Economics.
    3. Campos, Rodolfo G. & Timini, Jacopo & Vidal, Elena, 2021. "Structural gravity and trade agreements: Does the measurement of domestic trade matter?," Economics Letters, Elsevier, vol. 208(C).
    4. Yoto V. Yotov, 2021. "The Variation of Gravity within Countries (or 15 Reasons Why Gravity Should Be Estimated with Domestic Trade Flows)," CESifo Working Paper Series 9057, CESifo.
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    More about this item

    Keywords

    GATT; WTO; Heterogeneous Policy Effects; Structural Gravity; Welfare;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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