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Concentration and Markups in International Trade

Author

Listed:
  • Vanessa I. 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 I. Alviarez & Michele Fioretti & Ken Kikkawa & Monica Morlacco, 2025. "Concentration and Markups in International Trade," NBER Working Papers 34114, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34114
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    References listed on IDEAS

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    1. Kenneth Hendricks & R. Preston Mcafee, 2010. "A Theory Of Bilateral Oligopoly," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 391-414, April.
    2. 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.
    3. 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.
    4. Pol Antràs, 2015. "Global Production: Firms, Contracts, and Trade Structure," Economics Books, Princeton University Press, edition 1, number 10613.
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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