Estimation of Welfare Change due to the Trade Environment Change in China after Joining the World Trade Organization in 2001

The measurement of welfare brought about by trade environment change has long been a heated topic in international trade analysis. By utilizing compensating variation (by Grinols and Wong, and Irwin) and equivalent variation methodology, we separately measured not only the directions but also the magnitudes of the welfare changes that occurred after shocks to China in the following period: welfare change between 2001 and 2004 after China’s entrance into the World Trade Organization (WTO). The result shows that China gained up to 4.8% of GDP in welfare after its entrance into the WTO. The original methodology offered by previous studies as well as the EV measurement is also reviewed in this paper.