Department

Economics, Finance and Quantitative Analysis

Document Type

Article

Publication Date

8-2009

Abstract

Some recent empirical studies examine the impact of the GATT/WTO on trade. This paper investigates the sample selection bias and the gravity model specification issues in the literature. First, the GATT/WTO not only makes existing trading partners trade more at the intensive margin, but also creates new trading relationships at the extensive margin. Most existing papers exclude zero trade observations and hence ignore the extensive margin. Secondly, due to the violation of some maintained assumptions, the traditional log-linear gravity regressions fail to uncover the role of the GATT/WTO even at the intensive margin. Using a large bilateral panel dataset including zero trade flows and a more appropriate econometric method, this paper finds that the GATT/WTO has been very effective in promoting world trade at both the intensive and extensive margins.

Journal

Review of International Economics

Journal ISSN

0965-7576

Volume

17

Issue

3

First Page

428

Last Page

446

Digital Object Identifier (DOI)

10.1111/j.1467-9396.2009.00816.x

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