WTO Working Papers

WTO working papers usually represent research in progress. Such research may be conducted in the preparation of WTO Secretariat reports, studies or other material for WTO members. The papers are circulated for comment because the WTO considers critical review of professional research to be extremely important.


Footloose Global Value Chains

How Trade Costs Make A Difference

The geography of global value chains (GVCs) depends crucially on trade costs between countries hosting various stages of production. Some stages might be more sensitive to trade costs than others. In this paper, we exploit a value-added decomposition of bilateral trade flows to distinguish low value-added GVC trade typically associated with production stages such as assembly, from high value-added GVC trade associated with stages such as R&D and design. We test the hypothesis that low value-added stages will more easily reroute given changes in trade costs between importing and exporting countries than high value-added stages.


Keywords: Trade costs, Value added trade, Organisation of production
JEL: F13: International Economics / Trade / Trade Policy; International Trade Organizations; F23: International Economics / International Factor Movements and International Business / Multinational Firms; International Business; C23: Mathematical and Quantitative Methods / Single Equation Models; Single Variables / Single Equation Models; Single Variables: Panel Data Models; Spatio-temporal Models
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