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The WTO Trade Effect

Pao-Li Chang () and Myoung-jae Lee

No 06-2007, Working Papers from Singapore Management University, School of Economics

Abstract: Rose (2004) showed that the WTO or its predecessor, the GATT, did not promote trade, based on conventional econometric analysis of gravity-type equations of trade. We argue that conclusions regarding the GATT/WTO trade effect based on gravity-type equations are arbitrary and subject to parametric misspecifications. We propose using nonparametric matching methods to estimate the `treatment effect' of GATT/WTO membership, and permutation-based inferential procedures for assessing statistical significance of the estimated effects. A sensitivity analysis following Rosenbaum (2002) is then used to evaluate the sensitivity of our estimation results to potential selection biases. Contrary to Rose (2004), we find the effect of GATT/WTO membership economically and statistically significant, and far greater than that of the Generalized System of Preferences (GSP).

Keywords: GATT/WTO; GSP; treatment effect; matching; permutation test; signed-rank test; sensitivity analysis (search for similar items in EconPapers)
JEL-codes: F13 F14 C14 C21 C23 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2007-09
New Economics Papers: this item is included in nep-sea
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Published in SMU Economics and Statistics Working Paper Series

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Related works:
Journal Article: The WTO trade effect (2011) Downloads
Working Paper: The WTO Trade Effect (2010) Downloads
Working Paper: The WTO Trade Effect (2008) Downloads
Working Paper: The WTO Trade Effect (2007) Downloads
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