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Concentration and Markups in International Trade

Author

Listed:
  • Alviarez Vanessa
  • Fioretti Michele
  • Kikkawa Ken
  • Morlacco Monica

Abstract

This paper derives a closed-form expression linking aggregate markups on imported inputs to concentration in a model of firm-to-firm trade with two-sided market power. Our theory extends standard oligopoly insights in two dimensions. First, it reveals that markups increase with exporter concentration and decrease with importer concentration, reflecting the balance of oligopoly and oligopsony forces. Second, it adapts conventional market definitions to reflect rigid trading relationships, yielding new concentration measures that capture competition in firm-to-firm trade. Analysis of Colombian transaction-level import data shows these differences are key to understanding markup dynamics in international trade.

Suggested Citation

  • Alviarez Vanessa & Fioretti Michele & Kikkawa Ken & Morlacco Monica, 2025. "Concentration and Markups in International Trade," Papers 2508.00345, arXiv.org.
    • Handle: RePEc:arx:papers:2508.00345
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    References listed on IDEAS

    as
    1. Traina, James, 2018. "Is Aggregate Market Power Increasing? Production Trends Using Financial Statements," Working Papers 272, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    2. Gustavo Grullon & Yelena Larkin & Roni Michaely, 2019. "Are US Industries Becoming More Concentrated?," Review of Finance, European Finance Association, vol. 23(4), pages 697-743.
    3. Pol Antràs, 2015. "Global Production: Firms, Contracts, and Trade Structure," Economics Books, Princeton University Press, edition 1, number 10613.
    4. Kenneth Hendricks & R. Preston Mcafee, 2010. "A Theory Of Bilateral Oligopoly," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 391-414, April.
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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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