Discussion Paper Details

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Title: International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments

Author(s): Julia Cajal-Grossi, Rocco Macchiavello and Guillermo Noguera

Publication Date: January 2019

Keyword(s): Buyer-Driven Value Chains, Global Buyers, Markups and Sourcing Strategies

Programme Area(s): Development Economics, Industrial Organization and International Trade and Regional Economics

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.

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Bibliographic Reference

Cajal-Grossi, J, Macchiavello, R and Noguera, G. 2019. 'International Buyers' Sourcing and Suppliers' Markups in Bangladeshi Garments'. London, Centre for Economic Policy Research.