International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments

68 Pages Posted: 28 Jan 2019

See all articles by Julia Cajal-Grossi

Julia Cajal-Grossi

The Graduate Institute, Geneva

Rocco Macchiavello

University of Oxford - Nuffield College of Medicine; Centre for Economic Policy Research (CEPR)

Guillermo Noguera

Columbia University

Date Written: January 2019

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.

Keywords: Buyer-Driven Value Chains, Global Buyers, Markups, Sourcing Strategies

JEL Classification: D23, F63, L11, L14

Suggested Citation

Cajal-Grossi, Julia and Macchiavello, Rocco and Noguera, Guillermo, International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments (January 2019). CEPR Discussion Paper No. DP13482. Available at SSRN: https://ssrn.com/abstract=3324217

Julia Cajal-Grossi (Contact Author)

The Graduate Institute, Geneva ( email )

Geneva
United States

Rocco Macchiavello

University of Oxford - Nuffield College of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Guillermo Noguera

Columbia University ( email )

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