International trade has seen an increasing proportion of global production sharing – the slicing up of the production stages and locating them across several countries. Given this, standard gravity models that do not account for global production sharing are becoming increasingly inappropriate.

This paper adds to the growing literature on global production sharing.

The value added of this paper are two folds:

1. we look at the heterogeneous effect of global production sharing on different industries by analyzing the electronic and automobile industries separately; and
2. we look at the impact of macroeconomic variables like technology, institutions and macroeconomic stability – these variables have so far been ignored in global production sharing and are likely to be a major contribution to the literature.