Does WTO membership make a difference at the extensive margin of world trade?

Felbermayr, Gabriel and Kohler, Wilhelm K. (2007): Does WTO membership make a difference at the extensive margin of world trade? CESifo Working Paper,

Abstract

In his seminal paper, Rose (2004) concluded from a gravity-type study of bilateral trade that the GATT/WTO does not play a strong role in encouraging trade. Rose looks at countries where the amount of trade was positive to start with (intensive margin). In this paper, we present a corner-solutions version of the gravity model of bilateral trade which explains zero trade and leaves room for WTO membership to promote trade at the extensive margin of trade. Relying on a Tobit estimation approach, we find that WTO membership has promoted world trade to a larger extent than Rose s results seem to indicate.

• Item Type: Paper
• Faculties: Economics; Economics > Chairs > CESifo-Professorship for International Trade
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: F12, F13
• Language: English