GVC Journeys: Industrialisation and Deindustrialisation in the Age of the Second Unbundling

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Offshoring and participation in global value chains (GVCs) are critical to understanding the rapid deindustrialization of G7 nations and the rapid industrialization of a handful of developing nations. This paper distinguishes between trade in final goods and trade in parts to track the shifting pattern of the location of manufacturing. We introduce a simple empirical measure of comparative advantage in parts on one hand and in final goods on the other. We illustrate how this distinction can help organise thinking on the patterns of industrialization and deindustrialization—namely the "GVC journeys" of advanced and emerging economies. We also provide one simple model. The model highlights the interactions of trade costs and the knowledge transfers to accompany offshoring of parts production and assembly, which we call trade-led versus knowledge-led globalization.