The
fragmentation
of
production
chains
across
borders
is
one
of
the
most
distinctive
feature
of
the
last
30
years
of
globalization.
Nonetheless,
our
understanding
of
its
implications
for
trade
theory
and
policy
is
only
in
its
infancy.
We
suggest
that
trade
in
value
added
should
follow
theories
of
comparative
advantage
more
closely
than
gross
trade,
as
value-added
flows
capture
where
factors
of
production,
e.g.
skilled
and
unskilled
labor,
are
used
along
the
global
value
chain.
We
find
empirical
evidence
that
Heckscher-Ohlin
theory
does
predict
manufacturing
trade
in
value-added,
and
it
does
so
better
than
for
gross
shipment
flows.
While
countries
exports
across
a
broad
range
of
sectors,
they
contribute
more
value-added
in
techniques
using
their
abundant
factor
intensively.