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 e®ect based on gravity-type equations are arbitrary and subject to parametric misspeci¯cations. We propose us- ing nonparametric matching methods to estimate the `treatment e®ect' of GATT/WTO membership, and permutation-based inferential procedures for assessing statistical sig- ni¯cance of the estimated e®ects. 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 ¯nd the e®ect of GATT/WTO membership econom- ically and statistically signi¯cant, and far greater than that of the Generalized System of Preferences (GSP).
GATT/WTO, GSP, treatment e®ect, matching, permutation test, signed-rank test, sensitivity analysis
Chang, Pao Li and Lee, Myoung-Jae.
The WTO Trade Effect. (2007). Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/1075
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