Working with a panel dataset of of OECD countries over the decade 1994-2004, we examine linkages between cross-border trade and FDI in the service sectors. We first develop a consistent analytical framework for the application of the gravity model jointly to services trade and commercial...

We show that traditional gravity variables play a significant role in explaining trade flows related to global value chain participation. We find evidence that cooperation costs - measured by linguistic and geographical proximity - are more relevant for trade that reflects cross-border...