Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/106199
Authors: 
Groppo, Valeria
Piermartini, Roberta
Year of Publication: 
2014
Series/Report no.: 
DIW Discussion Papers 1437
Abstract: 
Do WTO commitments reduce the risk of trade policy reversals? To address this question, we rely on the theoretical model of varying cooperative tariffs by Bagwell and Staiger (1990) to specify our empirical model for the probability of a tariff increase. We then study how WTO tariff commitments affect this probability. We estimate our model using a database of WTO bound tariffs that we built for all WTO Members from 1996 to 2011 at the HS 6-digit level of disaggregation. Our results show that WTO commitments significantly reduce the probability of a tariff increase, even when the bound tariff is above the MFN applied rate. In addition, the WTO reduces trade policy uncertainty through its monitoring function. These results are robust to including political economy explanations of tariff changes and to addressing endogeneity concerns.
Subjects: 
gains from trade agreements
commitments
tariffs formation
binding overhang
JEL: 
F1
F5
Document Type: 
Working Paper

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