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International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments

Author

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  • Cajal-Grossi, Julia
  • Macchiavello, Rocco
  • Noguera, Guillermo

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

  • Cajal-Grossi, Julia & Macchiavello, Rocco & Noguera, Guillermo, 2019. "International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments," CEPR Discussion Papers 13482, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13482
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    References listed on IDEAS

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    More about this item

    Keywords

    Buyer-Driven Value Chains; Global Buyers; Markups; Sourcing Strategies;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • 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

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