Demand and Supply Linkages in Exporting Multiproduct Firms

Products produced by multiproduct firms can be linked through demand linkages (cannibalization), supply linkages (joint production), or both. We analyze how these within-firm linkages shape the propagation of shocks - such as tariffs - across products and markets and affect firm performance through changes in markups and marginal costs. Exploiting antidumping duties as firm-product-market specific shocks, we provide evidence of both types of linkages and quantify their relative importance. On average, two-thirds of within-firm linkages arise from demand linkages and one-third from supply linkages, with substantial heterogeneity across industries. We further estimate their effects on markups and marginal costs, showing that roughly 80% of the adjustment occurs through marginal costs and 20% through markups. Our findings indicate that disregarding either type of linkage can lead to sizable misestimations of markups and pass-through rates.