Disentangling the effects of GATT/WTO on variable and fixed trade costs: Trade status, trade margins, and export sales distribution

• Main Authors: CHANG, Pao-Li, CHEN, Renjing, JIN, Wei
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: Firm Entry/Exit; Truncated Pareto; Identification of Fixed and Variable Trade Costs; Simulation of Counterfactual Changes in Active/Inactive Trading Relationship; Quantitative Welfare Analysis; Growth and Development; International Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/2612; https://ink.library.smu.edu.sg/context/soe_research/article/3611/viewcontent/wtodyn.pdf
• Institution: Singapore Management University

In this paper, we develop an estimation procedure to identify the partial (direct) effects of the GATT/WTO membership on the variable and the fixed trade cost, re-spectively. This extends the techniques of Anderson and Van Wincoop (2003) on the structural relationship of multilateral resistance terms and of Helpman, Melitz and Rubinstein (2008) on the structural modelling of trade incidence. We then develop a general equilibrium framework (that allows the presence of zero trade) to simulate the impact of variable, fixed, and total trade cost changes on the firm-level trade structure (including bilateral export productivity cutoff, weighted/unweighted extensive margin of export, intensive margin, and the mass of active firms) and the aggregate welfare, due to the GATT/WTO system (given the trade cost effects estimated from the first stage), for the period 1991–2017.