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...

What drives globalization today and in the past? We employ a new micro-founded measure of bilateral trade costs based on a standard model of trade in differentiated goods to address this question. These trade costs gauge the difference between observed bilateral trade and frictionless trade....