Publication Type

Working Paper

Publication Date

9-2007

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 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).

Keywords

GATT/WTO, GSP, treatment e®ect, matching, permutation test, signed-rank test, sensitivity analysis

Discipline

International Economics

Research Areas

International Economics

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Comments

Econometrica

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