The Welfare Impact of Data Localization on the APEC

This article builds a quantitative trade model to evaluate the welfare effects resulting from data localization measures. Based on the constructed model, it employs data from the World Input-Output Database to examine the welfare impact of data localization on the APEC economies. This paper highlights two distinct features of data localization, namely variable and fixed exporting costs. It shows that data localization measures can hurt all trading partners of the APEC economies in terms of real consumption. Further, the magnitude of the welfare effects stemming from data localization differs considerably across countries. This article suggests that the APEC economies should make efforts to minimize the welfare losses that arise from data localization measures.