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 Title
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