Heterogeneous welfare gains from import variety across regions: evidence from South Korea

Abstract

ABSTRACT Globalization has differential impacts on trade patterns and welfare gains across regions within a country. Using panel data on 16 South Korean regions over the period 2000–2015, this study shows that new import varieties led to lower regional import prices, which in turn yielded positive welfare gains. However, both the uneven growth of import varieties and different degrees of product differentiation led to heterogeneous effects on import prices and welfare gains across regions. Regional differences in import prices and welfare gains are impacted more by variety growth than by product differentiation.