Concentration and Markups in International Trade

27.05.2024 14:15 – 15:30

INSTITUTE OF ECONOMICS AND ECONOMETRICS SEMINAR

Abstract:

We study the relationship between concentration and markups within Global Value Chains (GVCs), where trade is firm-to-firm and market power is bilateral. Our theory reveals an equilibrium relationship between concentration and markups in GVCs, similar to Cournot-like models, establishing concentration as a valuable policy tool. Unlike standard methods, we show that both supplier and buyer concentration impact markups, reflecting the bilateral nature of market power. Moreover, our approach adapts concentration measures to capture the networked trade structure, offering novel insights into concentration measurement within production networks. In an application to Colombian transaction-level import data, we gauge potential biases that may arise from naive HHI-based analysis when examining concentration in international trade.

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