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International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments

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  • Macchiavello, Rocco
  • Cajal-Grossi, Julia
  • Noguera, Guillermo

Abstract

Large international buyers play a key role in global value chains. We exploit detailed transaction-level data on the usage of material inputs to study how Bangladeshi garment suppliers' markups vary across international buyers. We find substantial dispersion in markups across export orders of a given seller for the same product. Buyer effects explain a significant share of this variation, while destination effects do not. Buyers adopting relational sourcing strategies pay higher markups than non-relational buyers. This pattern holds within seller-product-year combinations, is robust to controlling for the buyer's size, traded volumes, and quality, and, together with larger volumes, implies higher profits for suppliers dealing with relational buyers.

Suggested Citation

  • Macchiavello, Rocco & Cajal-Grossi, Julia & Noguera, Guillermo, 2019. "International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments," CEPR Discussion Papers 13482, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13482
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    Cited by:

    1. Koenig, Pamina & Poncet, Sandra, 2022. "The effects of the Rana Plaza collapse on the sourcing choices of French importers," Journal of International Economics, Elsevier, vol. 137(C).
    2. Vanessa Alvariez & Michele Fioretti & Ayumu Ken Kikkawa & Monica Morlacco, 2022. "Two-Sided Market Power in Firm-to-Firm Trade," SciencePo Working papers Main hal-03795736, HAL.
    3. Pamina Koenig & Sandra Poncet, 2019. "Reputation and (un)fair trade: Effects on French importers from the Rana Plaza collapse," Post-Print halshs-02350112, HAL.
    4. Alvaro Garcia-Marin & Santiago Justel & Tim Schmidt-Eisenlohr, 2019. "Trade Credit, Markups, and Relationships," CESifo Working Paper Series 7600, CESifo.
    5. Bassi, Vittorio & Nyshadham, Anant & Tamayo, Jorge & Adhvaryu, Achyuta, 2020. "No Line Left Behind: Assortative Matching Inside the Firm," CEPR Discussion Papers 14554, C.E.P.R. Discussion Papers.
    6. Ayuma Ken Kikkawa & Yuan Mei & Pablo Robles Santamarina & Ken Kikkawa, 2019. "The Impact of NAFTA on Prices and Competition: Evidence from Mexican Manufacturing Plants," CESifo Working Paper Series 7700, CESifo.
    7. Woodruff, Christopher & Macchiavello, Rocco & Menzel, Andreas & Rabbani, Atonu, 2020. "Challenges of Change: An Experiment Promoting Women to Managerial Roles in the Bangladeshi Garment Sector," CEPR Discussion Papers 15085, C.E.P.R. Discussion Papers.
    8. Macchiavello, Rocco & Miquel-Florensa, Josepa, 2019. "Buyer-Driven Upgrading in GVCs: The Sustainable Quality Program in Colombia," CEPR Discussion Papers 13935, C.E.P.R. Discussion Papers.
    9. Yoshimichi Murakami & Keijiro Otsuka, 2020. "Governance, Information Spillovers, and Productivity of Local Firms: Toward an Integrated Approach to Foreign Direct Investment and Global Value Chains," The Developing Economies, Institute of Developing Economies, vol. 58(2), pages 134-174, June.

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    More about this item

    Keywords

    Markups; Sourcing strategies; Global buyers; Buyer-driven value chains;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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