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We propose a comprehensive decomposition of changes in global market shares that accounts for the value-added content. We find that the ongoing globalization process affects market shares directly by shifting production from developed to developing countries. Moreover, apparent improvements in the relative quality of exported goods from most new EU member states and developing countries occur to some extent from higher quality imported inputs. Hence, the process of outsourcing high-quality production from developed countries plays an important role and reduces the contribution of residual non-price factors in explaining market share gains of developing countries.

“Made in China”: how does it affect our understanding of global market shares?