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Concentration and Markups in International Trade

Author

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

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

  • Vanessa Alviarez & Michele Fioretti & Ken Kikkawa & Monica Morlacco, 2025. "Concentration and Markups in International Trade," CESifo Working Paper Series 12046, CESifo.
    • Handle: RePEc:ces:ceswps:_12046
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    File URL: https://www.ifo.de/DocDL/cesifo1_wp12046.pdf
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    Keywords

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    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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