Reconciling the WTO Effects on Trade at the Extensive and Intensive Margins

Empirical studies examining the impact of World Trade Organization (WTO) membership have produced disparate results. These studies, however, have focused on total aggregate trade flows. In this paper, we utilize disaggregated product level data to examine the impact of WTO membership on the product level extensive and intensive margin of imports. Utilizing the Poisson Pseudo-Maximum Likelihood (PPML) estimation that allows for heteroskedasticity in trade data and accounting for several estimation issues, we do not find a positive impact on either margins between WTO member country-pairs. Once we examine asymmetries in trade flows across countries based on their level of development, we find that developing WTO members experience an increase in the extensive margin from industrial member countries. Additionally, the industrial WTO members also experience an increase in the extensive margin from developing WTO members. Results suggest that WTO facilitates the North–South trade relationship, which has been largely absent in trade literature.