Does WTO Matter for the Extensive and the Intensive Margins of Trade?

34 Pages Posted: 28 Mar 2011

See all articles by Pushan Dutt

Pushan Dutt

INSEAD - Economics and Political Sciences

Ilian Mihov

INSEAD; Centre for Economic Policy Research (CEPR)

Timothy Van Zandt

INSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: March 2011

Abstract

We use 6-digit bilateral trade data to document the effect of WTO/GATT membership on the extensive and intensive product margins of trade. We construct gravity equations for the two product margins where the specifications of these gravity equations are motivated by the model of Eaton and Kortum (2002). The data show that the puzzle of no significant impact of WTO membership on trade documented by Rose (2004) manifests itself differently at the product margins of trade. We show that the impact of the WTO is almost exclusively on the extensive product margin of trade, i.e. trade in goods that were not previously traded. In our preferred specification, WTO membership increases the extensive margin of exports by 31%. At the same time, WTO membership has a negligible or even a negative impact on the intensive margin (the volume of already-traded goods). Incidentally, we also document that standard gravity variables provide good explanatory power for bilateral trade on both margins.

Keywords: extensive margin of trade, Gravity, intensive margin of trade, WTO

JEL Classification: F02, F13, F15

Suggested Citation

Dutt, Pushan and Mihov, Ilian and Van Zandt, Timothy, Does WTO Matter for the Extensive and the Intensive Margins of Trade? (March 2011). CEPR Discussion Paper No. DP8293. Available at SSRN: https://ssrn.com/abstract=1794883

Pushan Dutt (Contact Author)

INSEAD - Economics and Political Sciences ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore
65-6799-5498 (Phone)

HOME PAGE: http://faculty.insead.edu/pushan-dutt/

Ilian Mihov

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore, Singapore 138680
Singapore
+65 6799 5434 (Phone)

HOME PAGE: http://www.insead.edu/facultyresearch/faculty/personal/imihov/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Timothy Van Zandt

INSEAD - Economics and Political Sciences ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4981 (Phone)
+33 1 6074 6192 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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