reason for this is that even when a firm is identified as an exporter of intermediate inputs (rather than of final goods), it is virtually impossible to establish whether those inputs are fully absorbed in the importing country, or whether they are re-exported to third markets by the importing firms after having added value to them. We envision a future in which researchers will be able to conduct more satisfactory analyses with linked customs-data datasets from a variety of countries, but this future is not yet here.

It should be stressed that the above firm-level measures only identify the extensive margin of GVC participation, while industry-level measure based on global Input-Output tables also capture the intensity of GVC participation. Computing intensive measures of GVC participation at the firmlevel data is however challenging, particularly in situations in which complementary census-level information is not available. The reason for this is that customs-level data have no information on firms’domestic purchases of inputs and on firms’domestic sales of goods. As a result, it is diffi cult to infer the ratio of foreign inputs used in production, and it is even more challenging to disentangle the foreign-input content of exports from the foreign-content of overall production (see Kee and Tang, 2016, for an attempt using processing trade in China).

Firm-level information on importing and exporting can also be used to shed light on the extent to which global Input-Output tables provide an accurate description of value-added trade flows across countries. Even when the entries of these tables provide an accurate account of the origin of inputs in a country’s industrial production, the standard methods used to compute bilateral value-added trade flows from these tables assume that the same combination of inputs is used in production regardless of the destination of sales of a country and industry’s output. As demonstrated by de Gortari (2018) with firm-level evidence from Mexico, in practice, firms selling output to different markets use very different combinations of sources of inputs, and this has significant implications for the type of bilateral value-added trade flows one infers from global Input-Output tables. For instance, because Mexican exports to the U.S. embody a disproportionate amount of U.S. value added relative to Mexican exports to other countries, de Gortari estimates that the share of U.S. value in U.S. imported Mexican manufactures is 30%, rather than the 17% one would infer from standard techniques applied to global Input-Output tables.<sup>11</sup> We now turn to elucidate the determinants and consequences of GVC participation through the lens of this firm-level approach to GVCs. To be clear, many of the forces outlined in the initial traditional conceptualization of GVCs continue to hold under this novel approach, so the focus will be on outlining distinct implications that arise in the present context.

# 3.2 Determinants of GVC Participation

Firm-level GVC participation is shaped by many of the same forces that shape GVC participation at the country-industry level. Firms in countries with large endowments of factors that are used

> 11 Apart from qualifying the type of implications that one can draw from aggregated Input-Output tables, firm-level data can also be fruitfully used to test more systematically the validity of the “proportionality”assumptions that go into the construction of those data.

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