Estimating Consumer Surplus Resulting from Lower Cross-Border E-Commerce Prices

Cross-border B2C e-commerce is growing rapidly in Korea. According to data released by Statistics Korea, Korea’s total retail import value from the cross-border e-commerce trade in 2017 stood at about KRW 2.2 trillion, while in 2021 it reached KRW 5.1 trillion.2 The total retail value of consumer goods in 2017 and in 2021 was KRW 440.3 trillion and KRW 518.5 trillion, respectively.3 Thus the share of the total retail value of consumer goods accounted for by cross-border e-commerce retail imports rose from 0.5 percent in 2017 to one percent in 2021.In the literature on cross-border e-commerce in Korea, studies have found that cross-border e-commerce increases consumer welfare. But no research has determined quantitatively how the degree to which this occurs. Therefore, this study aims to estimate the level of consumer welfare that domestic consumers can obtain from cross-border e-commerce. Increases in consumer welfare due to cross-border e-commerce can be divided into increases due to lower prices and increases due to wider product variety. This study aims to identify the increases in consumer welfare due to lower prices by estimating consumer surplus