weight in kilograms) of bilateral import data by HS-06 product code from UN Comtrade.<sup>25</sup> For each dispute we measure “world” or exporter-received _prices_ for the product under dispute from data based on the ratio of the real value of imports associated with the dispute to the netweight (kilograms) of imports, deflating the nominal import value data using the IMF’s world import price index. While we are interested in the impact of changes to prices received by foreign exporters, our unit values are constructed from importer data, which is more reliable than exporter-reported data, but which is compiled on a c.i.f. basis and thus includes the insurance and freight costs that arise in getting from the exporter’s (complainant’s) to the importer’s (respondent’s) border. However, because our analysis focuses on changes in these unit prices, our estimates will be unaffected by differences in levels of these freight and insurance costs across products, provided these costs do not change substantially during the period of the particular dispute.<sup>26</sup> Because weight data are not available for all HS-06 products, our approach is to drop any dispute in which volume data is not available for at least 80 percent of the disputed products’ HS06 codes. Of the remaining disputes, import volume data is available for almost all HS-06 codes. For the handful of disputes without volume data for all HS-06 codes, we drop those HS-06 products with a positive value of imports but missing quantity of imports. This approach provides the best assurance that our price variable, measured in dollars per kilogram, is calculated accurately. This conservative approach forces us to drop 79 disputes from the population of WTO cases because of unobserved import volumes.<sup>27</sup> Estimation of equation (12) also requires data on the _domestic_ price in the respondent country ( _p_<sup>_BR_</sup> _grc_<sup>).Becausewedonotobservedomesticpricesdirectly,weinsteadproxyforthesepricesusing</sup> the average f.o.b. (free on board) export unit value associated with the products under dispute from the respondent country to the world.<sup>28</sup> Intuitively, the border price of a product being exported should be identical to the domestic price under the law of one price, which states that identical products sold in different countries should be the same price when expressed in the same currency. This has been used to justify substituting export prices for domestic prices in a number of different contexts. For example, the Canadian government’s export price index was constructed 25Disputes in our sample may target alleged WTO violations affecting products at a finer or more coarse level of aggregation than the HS-06. To the extent that disputes are over traded products at a finer level of aggregation, our approach may mismeasure the volume of imports. Nevertheless, more than 70 percent of disputes in our sample target products measured at the HS-06 or more coarse level of aggregation.

> 26While freight and insurance rates are not time invariant during our sample, our results should be unaffected provided these changes are not correlated with changes in levels of trade protection. Nevertheless, because the error in the change in the exporter prices may be larger the longer is the duration of the dispute (i.e., the larger the difference between year _t_ = _PO_ and _t_ = _BR_ ), we include the change in crude oil prices interacted with the distance between the respondent and complainant to address changes in transportation costs over the dispute period. We describe this in more detail in our discussion of instrument construction.

> 27Such an approach could result in sample selection bias if, for example, low-income countries are less likely to record import volume data than others. The proportions of low income respondents and complainants in our final sample are virtually identical to those in the population of WTO disputes.

> 28Similar to the calculation of world prices, we calculate this variable using the ratio of the real value of exports from the respondent country to the world to the netweight (kilograms) of these exports, deflating the nominal export value data using the IMF’s world import price index. To avoid any potential bias in this value tied to the dispute itself, we exclude from this calculation the respondent’s exports to the complainant country(s) in the dispute.

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