The International Fragmentation of Financial Production

Since the 1990s, service sectors have expanded significantly, surpassing manufacturing in most economies. This shift has occurred alongside the rise of global value chains (GVCs), with an increasing share of trade involving intermediate services. However, existing GVC literature has largely overlooked the global fragmentation of financial services. This work addresses this gap by applying a GVC perspective to the international organization of financial production. We provide an exploratory analysis of the fragmentation and positioning of the Financial and Insurance (FI) sector between 1995 and 2020. Using Inter-Country Input-Output (ICIO) data, we trace cross-border flows of intermediate financial services and map the emerging global hierarchy across advanced and emerging economies. Our findings show that, unlike manufacturing GVCs, which have stagnated since the 2008 crisis, the international fragmentation of financial production has continued to expand. Within this process, the United Kingdom’s financial sector has consolidated an increasing upstream position in global financial chains, allowing it to appropriate a growing share of value embodied in international trade flows. These results shed new light on the spatial organization of financial services and the uneven value capture opportunities across countries, opening new research avenues on global hierarchies within the GVCs of the financial industry.