Accounting for Intermediates: Production Sharing and Trade in Value Added∗

We combine input-output and bilateral trade data to quantify cross-border production linkages. Using a complete trading system, we compute bilateral trade in value added for 87 countries and regions. The ratio of value added to gross exports is a measure of the intensity of production sharing. Across sectors, manufacturing has a relatively low ratio and thus accounts for a smaller share of exported value added than gross exports. Across countries, aggregate ratios are negatively correlated with exporter income, primarily due to cross-country differences in the composition of exports. Across bilateral partners, ratios vary widely and contain information on both bilateral and triangular production chains. Further, bilateral imbalances measured in value added differ from gross imbalances. ∗We thank Judith Dean, Stefania Garetto, Pierre-Olivier Gourinchas, Esteban Rossi-Hansberg, Zhi Wang, and Kei-Mu Yi for helpful conversations, as well as participants in presentations at the Federal Reserve Board, IMF, the Philadelphia Federal Reserve, Princeton, the USITC, and UC Berkeley. Noguera gratefully acknowledges financial support from UC Berkeley’s Institute for Business and Economic Research. †Corresponding Author. Department of Economics, Dartmouth College, Hanover, NH 03755, USA. E-mail: [email protected]. Telephone: +1-847-532-0443. ‡Department of Economics, University of California, Berkeley, CA 94720, USA. E-mail: [email protected].