Global Value Chains have proliferated economic policy debates. Yet a key concept – trade in value
added –is likely mismeasured because of sectoral aggregation bias stemming from reliance on inputoutput
tables. This paper uses comprehensive firm-level data on both domestic and international
transactions to study this bias. We find that sectoral aggregation leads to overstated trade in value
added and, correspondingly, understated import content of gross exports. The economic magnitude
of the estimated bias varies from moderate to large – at 2-5 p.p. of gross exports for Belgium and
17 p.p. for China. We study how the interplay between within-sector heterogeneities in firm import
and export intensities and firm size determine the magnitude of the sectoral aggregation bias