3 during the initial phases of trade liberalization can often be exaggerated. This occurs when a country’s exports are heavily dependent on GVCs while forming only a minor portion of its total domestic output. Such a scenario was seen in early liberalizing China, for example. Measuring GVC participation against domestic output, in addition to trade, reveals that economies at such junctures are more shielded from international disturbances than previously thought. Moreover, the measures also allow to empirically show that GVC integration mediates the impact of demand shocks on domestic output in opposing directions, leading both to higher exposure and greater stabilizing potential for the domestic economy.

The rest of the paper is structured as follows: Section 2 provides a short literature review. Section 3 describes the tri-partite decomposition of GVC trade and it applies these concepts to GVC-related output. Section 4 applies these measures to multiple ICIO databases, highlighting how different countries and sectors participate in GVCs and comparing trade- and output-based metrics. Section 5 provides an empirical application of the new measures by examining how different types of GVC participation mediate the transmission of external demand shocks to domestic output. Section 6 concludes by summarizing key insights and outlining implications for research and policy. The full methodology describing the accounting framework and additional results are available in the supplementary online appendix, while the full set of new measures, provisioned from all major ICIO databases is available on the World Bank’s WITS Platform and described in Section S1 of the supplementary online appendix.

# **2 Related Literature**

Rigorous measures of GVC participation are needed to inform questions relevant to economic growth and development. Among these questions, there are two of primary importance: firstly, the extent of GVC involvement by different countries and industries; and secondly, the nature of their participation. In essence, good measures of GVC participation are needed to discern the importance of a given country’s involvement for the domestic economy, and whether it primarily manifests itself as input supply to downstream nations and industries, as utilization of foreign inputs, or as a combination of both. Assessing the extent to which the production and exchange of goods and services is interconnected globally is, however, a complex task. The most accurate and thorough approach requires data at the individual company level from numerous countries, especially when aiming for a global perspective. Obtaining such extensive and specific data poses a major hurdle, since very few countries generate the required data (Bems & Kikkawa, 2021). Owing to the shortage of such data, researchers have dedicated significant effort over the past twenty-five years to methodically combine transaction data from customs with national aggregate production data. They have developed accounting measures at the country-sector level based on global databases of inter-country input-output (ICIO) relationships. This approach ensures a scientific rigor in their analysis, despite well-known limitations due to assumptions in terms of homogeneity, proportionality and aggregation that such data require, as discussed by de Gortari (2019), Antr`as (2021) and Bems and Kikkawa (2021) among others. The resulting country-sector level measures have allowed to quantify the extent to which production processes have become global in the past decades, and how countries and sectors participate in GVCs, together with other features of participation, such as direct and indirect supply and demand inter-linkages. The study by Antr`as (2020) calls this body of work “the broad view of GVC participation” while Antr`as and Chor (2022) define it as the “macro-approach” to GVC