6533b829fe1ef96bd128af91

RESEARCH PRODUCT

Does the GATT/WTO promote trade? After all, Rose was right

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This paper re-examines the effect of the GATT/WTO on trade using recent econometric developments that allow us estimating structural gravity equations with the Poisson pseudo-maximum likelihood (PPML) estimator on a large dataset that requires computing high-dimensional fixed effects. By doing so, we overcome computational limitations that are present in previous studies. In line with Rose’s (Am Econ Rev 94:98–114, 2004) seminal work, we find that, unlike regional trade agreements and currency unions, the GATT/WTO accession has not generated positive trade effects. This result is robust to the use of alternative measures of trade flows, across periods and country groups, to changes in the periodicity of the data, when taking into account the GATT/WTO accession dynamics, to controlling for the participation of only one country of the dyad in GATT/WTO, to the consideration of non-member participants, and to the use of alternative datasets. Notwithstanding, we also find that PPML results are sensitive to the definition of the dependent variable.