WTO and Growth : A Cross Country Event Study

Does accession to the WTO stimulate faster growth? The issue is not only of interest to the business and policy communities, but also a test case of several active lines of economics research on openness and growth. We conduct an event study of accessions to the WTO (GATT) of 74 economies. The findings show that only high-income economies (with per capita income over USD3,000 in 1987) experienced significantly faster growth after the accessions, implying that openness per se is not sufficient to promote growth and convergence. We also find that economies with common-law origin grew faster after the accession, while economies with continental European legal origins improved moderately, and former socialist economies experienced little growth change. These results imply that openness needs to be combined with proper economic institutions in order to be effective in promoting faster growth