Unemployment Effect of WTO Ascension : Evidence From a Natural Experiment

Because international trade affects the rate of unemployment, ascending the World Trade Organization (WTO) established to improve the outcomes of trade will impact employment. By using a dataset covering 175 countries between 1991 and 2017 and exploiting the exogenous variation in the ascension years of countries, we estimate the causal effect of ascending WTO on the unemployment rate. Difference-in-difference estimates imply that unemployment rate reduced by 13.7 percent. Countries that ascended between 2011 and 2017 had the highest reduction in unemployment compared to those that joined between 1995 to 1999 and 2000 to 2010. Also, the effect of ascension is more for developing countries than developed countries. Our results are robust to the matching of countries by ascension period and are not influenced by any simultaneous shock or pre-existing political and economic conditions. These results point to the need for non-member countries to join the organization