Does WTO Membership Make a Difference at the Extensive Margin of World Trade?

39 Pages Posted: 8 Feb 2007

See all articles by Gabriel J. Felbermayr

Gabriel J. Felbermayr

University of Stuttgart-Hohenheim

Wilhelm Kohler

University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 2007

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.

Keywords: gravity approach, WTO, monopolistic competition, real trade costs

JEL Classification: F12, F13

Suggested Citation

Felbermayr, Gabriel J. and Kohler, Wilhelm K., Does WTO Membership Make a Difference at the Extensive Margin of World Trade? (January 2007). CESifo Working Paper Series No. 1898, Available at SSRN: https://ssrn.com/abstract=962040 or http://dx.doi.org/10.2139/ssrn.962040

Gabriel J. Felbermayr

University of Stuttgart-Hohenheim ( email )

Keplerstra├če 17
D-70174 Stuttgart
Germany

Wilhelm K. Kohler (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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