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Global Value Chain Participation, Competition, and Markups: Evidence from Ethiopian Manufacturing Firms

Author

Listed:
  • Choi, Jieun

    (World Bank, USA)

  • Fukase, Emiko

    (World Bank, USA)

  • Zeufack, Albert G.

    (World Bank, USA)

Abstract

This study uses detailed manufacturing census panel data for 2000 to 2014 to explore the relationship between Ethiopian firms’ global value chain (GVC) participation and markups. We find that GVC firms, defined as firms involved in both exporting and importing intermediate inputs, tend to have lower markups relative to non-trading firms and firms that are involved only in material imports. Moreover, the more intensely a firm is integrated into a GVC (measured by the share of export value added and imported inputs in total sales), the lower its markup is. Finally, we explore competition effects at the industry level and find that firms operating in industries with a relatively high GVC presence and suppliers selling inputs to such industries tend to have lower markups owing to horizontal competition and backward linkages, respectively. All of these findings suggest that GVC participation is associated with greater competition for Ethiopian firms.

Suggested Citation

  • Choi, Jieun & Fukase, Emiko & Zeufack, Albert G., 2021. "Global Value Chain Participation, Competition, and Markups: Evidence from Ethiopian Manufacturing Firms," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 36(3), pages 491-517.
    • Handle: RePEc:ris:integr:0835
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    Cited by:

    1. Adrián Rodríguez Valle & Esteban Fernández-Vázquez, 2023. "Estimating market power for the European manufacturing industry between 2000 and 2014," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 50(1), pages 141-172, February.

    More about this item

    Keywords

    competition; Ethiopia; global value chain; markup;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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