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The WTO Trade Effect

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Pao-Li Chang

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Working Paper

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This paper proposes to reexamine the GATT/WTO membership effect on bilateral trade flows, using nonparametric methods including pair-matching, permutation tests, and a Rosen-baum (2002) sensitivity analysis. Taken together in a coherent manner, these methods provide an estimation framework that is robust to misspecification biases, allows general forms of heterogeneous treatment effects, and addresses potential hidden selection biases. This is in contrast to most conventional parametric studies of this issue based on gravity models. The results here suggest large GATT/WTO trade-promoting effects, robust to various restricted matching criteria, alternative indicators for GATT/WTO involvement, and different matching methodologies.

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