Working Paper: CEPR ID: DP13482
Authors: Rocco Macchiavello; Julia Cajal Grossi; Guillermo Noguera
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.
Keywords: markups; sourcing strategies; global buyers; buyer-driven value chains
JEL Codes: L11; L14; D23; F63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| buyers adopting relational sourcing strategies (L14) | suppliers' markups (L11) |
| relational buyers (L14) | higher profits for suppliers (D49) |
| buyers' sourcing strategies (L81) | markup variations (Y60) |
| buyer characteristics (D12) | markup variations (Y60) |
| buyer effects (D12) | variation in markups (L11) |
| relational sourcing strategies (L14) | output elasticity of fabric (L67) |