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International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments

Author

Listed:
  • Grossi, Julia Cajal

    (Graduate Institute, Geneva)

  • Macchiavello, Rocco

    (London School of Economics and CEPR)

  • Noguera, Guillermo

    (Yale University and CAGE)

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

  • Grossi, Julia Cajal & Macchiavello, Rocco & Noguera, Guillermo, 2019. "International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments," CAGE Online Working Paper Series 403, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:403
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/403-2019_cajalgrossi_macchiavello_noguera.pdf
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    References listed on IDEAS

    as
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    2. Defever, Fabrice & Fischer, Christian & Suedekum, Jens, 2016. "Relational contracts and supplier turnover in the global economy," Journal of International Economics, Elsevier, vol. 103(C), pages 147-165.
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    5. Rocco Macchiavello & Ameet Morjaria, 2015. "The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports," American Economic Review, American Economic Association, vol. 105(9), pages 2911-2945, September.
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    More about this item

    Keywords

    Markups; Sourcing Strategies; Global Buyers; Buyer-Driven Value Chains JEL Classification: L11; L14; D23; F63;

    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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