Measuring the welfare gains from trade: the case of China's entry into the WTO

https://ecm.univ-paris1.fr/nuxeo/site/esupversions/f25a2b1e-256f-454c-8ebf-f9c2b775788fThis paper provides an ex-post analysis of the impact of China's entry into the WTO on its welfare. To do so we use a formula introduced by Arkolakis et al. (2012) that permits to assess the impact of a foreign shock on welfare in a wide range of trade models. We try to make it as accurate as possible to the case of Chinese liberalization by using extensions of the basic formula. We find that the gains over the period are substantial. Due to the liberalization, the aggregate welfare increases by about half a percent. In line with theory, the sectors in which China benefited the most are the ones in which it had a comparative disadvantage before the liberalization