It aims to apply RDD and Logit Regression to identify and estimate the effects of trade systems (IV) on conflict risk (DV) and to test the assumed causality. RDD is regarded as one of the “Most Harmless Econometrics” (Angrist & Pischke, 2009).1 It is usually applied in situations when the samples are selected to receive treatment on the basis of “whether their value for a numeric rating exceeds a designated threshold or cut-point.” It is widely used in allocating resources and imposing sanctions. One of the preconditions for applying the valid RDD is that the setting of the cut-off point should be independent from the rating of specific candidates (Bloom, 2009).
Accession into GATT/WTO usually indicates changes of both the domestic policies of a given country and global rules to some extent (particularly when big powers are involved). It creates conditions for allocating or re-allocating resources, which is relevant to RDD. In this case, the treatment is the involvement into the trade system, which makes a difference between membership and non-membership in terms of rating. In order to minimize the possible inter-relations between the setting of the cut-off point and rating of samples, this chapter introduces and emphasizes the “Adjusted Year” as the running variable rather than the natural years from 1946 to 2009. As a result, the paper arbitrarily assigns -10, -5, -2, 0, 2, 5, and 10 as the cutoff points, which is actually independent from the rating or score
1 However, some scholars recently caution high-degree polynomials in RD model may cause noisy estimation and inaccurately overfit (Gelman & Zelizer, 2015). In this regard, this thesis avoids the critic and applies quadratic form rather than third- or fifth-degree polynomial form in modelling and graphing.
Furthermore, in order to provide reliable results, it also examines on different timelines to verify the causal inference.
that is based on the accession (or not) of a given country into GATT/WTO in a given year.
The general RD estimator that measures the causal effect of the trade system on conflict incidence can be written as (4.1).
𝜏𝜏𝑡𝑡𝑟𝑟𝑎𝑎𝑑𝑑𝑒𝑒 = lim𝑥𝑥↓𝑐𝑐(𝑌𝑌𝑖𝑖|𝑋𝑋𝑖𝑖 = 𝑥𝑥)−lim𝑥𝑥↑𝑐𝑐(𝑌𝑌𝑖𝑖|𝑋𝑋𝑖𝑖 = 𝑥𝑥) (4.1) where 𝑌𝑌𝑖𝑖 is the conflict outcome of a given country (𝑖𝑖), 𝑋𝑋𝑖𝑖 is the given country’s involvement in the trade system (or not), 𝑥𝑥 means the year that the country moves to WTO, and c refers to the cut-off point that determines assignment that is equal to 2 in this research. If 𝑥𝑥 is not smaller than 2, it indicates that the country receives the treatment.
As a supplement, it applies T-test and general regression in cubic form to test the validation and robustness of RDD. In addition to RD analysis, this chapter uses logit regression to further investigate and test the causal relations between trade system and conflict incidence because conflict incidence is a binary variable, “0” or
“1”.
4.3.2 Data and Sources
The analysis unit in this chapter is “country-year”. From 1946 to 2009, there are about 8,748 observations in total.
1) Independent Variable: International Trade Institution
The IV is the international trade institution in which a given country is involved, mainly GATT and WTO. This chapter firstly assumes GATT and WTO as the same international trade arrangement (albeit from different time periods).
Their functional differences are demonstrated based on the progress of trade negotiation rounds.
After the failure of the International Trade Organization, GATT came into being in 1948, and was replaced by the WTO in 1995. Goods, services and intellectual property constitute the majority of WTO concerns. Accordingly, there are three main agreements within WTO areas in which the researcher is interested,
i.e. The General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Service (GATS) and Trade Related Aspects of Intellectual Property Rights (TRIPS).
This chapter categorizes the involvement of a given country in GATT/WTO through both broader and narrower definitions. In respect to narrower definitions, this chapter assumes one country’s involvement in GATT/WTO from the very year it was officially accessed into the international institution, i.e. the formally
“Contracting Parties” in GATT and “membership” in WTO. In this case, if a country has membership of GATT/WTO in a year, it is defined as “1”, otherwise as “0”.1
However there were ways for a country to interact with GATT, like the de facto status for the new-born post-colonial countries, or provisional accession. In respect to the broader definition, this chapter also regards its accession into one of the three mentioned categories as its involvement in GATT/WTO. In order to highlight the degree of a country’s involvement in the international trade institution, the paper subsequently classifies five types of involvements from lower degree to higher degree, respectively, no involvement “0”, de facto status “1”, provisional accession “2”, GATT contracting party “3”, and WTO membership “4” (See Table 4-1).
Table 4-1Description of Independent Variable by Involvement Degree
Involvement Degree Frequencies Percent (%)
Non-Membership 2,877 32.89
De Facto Status 561 6.41
Provisional accession 76 0.87
GATT Contracting Parties 3,269 37.37
WTO Membership 1,965 22.46
Total 8,748 100
Note: country-year as analysis unit
By the end of 1994, there were 128 GATT contracting parties (GATT, 1996) and there were 153 WTO members by 23 July 2008 (WTO, 2009). It is necessary to
1 The “Coding Book on GATT/WTO Data” is attached in Appendix I.
note that the countries or separate customs territories surveyed are mainly based on the sample in the UCDP dataset since 1946. According to the sample, there are 143 WTO members in 2009. Its annual change is displayed in Figure 4-4.
At the same time, the international trade institutions have gradually made progress on the increasingly large trade liberalization since the birth of GATT in the 1940s. From 1947 to 2009, there were eight successful negotiation rounds (Geneva Round 1947, Annecy Round, Torquay Round, Geneva Round 1956, Dillon Round, Kennedy Round, Tokyo Round, Uruguay Round) and an ongoing round, i.e.
the Doha Development Negotiation Round since 2001 (WTO, 2011c). From the Geneva negotiation in 1947, each round would increase the list of tariff reductions, reductions of other non-tariff barriers, and other kinds of issues, which indicate larger and larger degrees of world trade liberalization. Therefore, this chapter categorizes rounds to indicate various degrees of trade liberalization globally.
Figure 4-4 Number of GATT/WTO Members, 1948-2009
Furthermore, this chapter takes the time that a given country has been involved in GATT/WTO as an important variable, i.e. “Adjusted Year”, which can be applied to the measurement of the adaptive degree of a given country in the international trade institution. The maximum time for a given country involved in GATT/WTO is 61 years, while there are -99 years to indicate non-involvement of a country. Some rounds, especially after the Dillon Round, took 3-8 years to achieve
050100150Number
1946 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009
Sources: GATT Activities, 1952-1995; WTO Annual Report 1996-2009; WTO website.
Number of GATT/WTO Members, 1948-2009
GW Members in Sample GW Members in Historical Documents GW Members in WTO Website
agreements; while the Doha round has experienced 10 years of negotiations, but there is no hope of an ending, at least for now. 8,748 observations are distributed in Table 4-2.
Table 4-2 Negotiation Rounds as the Indicator of Trade Liberalization Degree
Period Categories Freq. Period Categories Freq.
before 1947 Pre-GATT 71 1961-1966 Dillon 1961 735 1947-1948 Geneva 1947 151 1967-1978 Kennedy 1967 1,693 1949-1950 Annecy 1949 164 1979-1993 Tokyo 1979 2,311 1951-1955 Torquay 1951 417 1994-2009 Uruguay 1994 2,732 1956-1960 Geneva 1956 474 Doha Round is still in negotiation.
2) Dependent Variable: Incidence and Onset of Internal Armed Conflicts This research regards incidence and onset of internal conflicts as the DV and adopts the intrastate conflict definition of more than 25 battle deaths. It sources from the “Onset of Intrastate Armed Conflict, 1946-2009” by the Uppsala Conflict Data Program (UCDP) (Harbom & Wallensteen, 2010).1
Figure 4-5 Annual Distribution of Internal Armed Conflicts, 1946-2009
1 According to the country-year analysis unit, there are 8,750 observations from 1946 to 2009. However, two of these observations have lost their record of countries, which are marked as “-99” as the country code.
In this chapter, the two cases in RDD analysis and Logit regression are left out.
010203040Frequency
1945 1955 1965 1975 1985 1995 2005 Year
Annual Frequency of Conflict Incidence
0.05.1.15.2.25Risk
1945 1955 1965 1975 1985 1995 2005 Year
Annual Risk of Conflict Incidence
051015Frequency
1945 1955 1965 1975 1985 1995 2005 Year
Annual Frequency of Conflict Onset
0.02.04.06.08.1Risk
1945 1955 1965 1975 1985 1995 2005 Year
Annual Risk of Conflict Onset
Quadratic Fit
Annual Distribution of Internal Conflicts, 1946-2009
If there was at least one active conflict, it is coded “1” in all the country-year observations; otherwise, it is coded as “0.” The annual distribution of internal conflicts by quadratic fit is in Figure 4-5.1 The incidence risk of internal conflicts is defined as the number of country-year observations with conflicts divided by the sum of country-year observation in a given year. The onset of internal armed conflicts generally follows a similar path to a dummy variable. The onset risk of internal conflicts is equal to the ratio of the number of country-year observations with conflict onset in a given year.
3) Controlling Variables
This chapter identifies the relations between international trade institutions and conflict incidence as mentioned while a series of controlling variables are taken into account. The controlling variables and their respective sources are listed as follows in Table A-1 in Appendix III.