Julia Cajal Grossi, The Graduate Institute of International and Development Studies
Department seminar. Julia Cajal Grossi is an Assistant Professor at The Graduate Institute of International and Development Studies, Geneva. She will present a paper entitled "International Buyers and Firm Performance", co-authored by Rocco Macchiavello and Guillermo Noguera.
Julia Cajal Grossi.
Dealing with international buyers - especially those from developed countries - can substantially improve performance of exporters from developing countries. This paper exploits uniquely detailed customs data from the Bangladeshi Ready-Made Garment sector in which imported input materials can be matched to export orders for specific buyers. Observing prices and quantities for both import and export transactions we develop a methodology that recovers order level marginal costs and markups under relatively mild assumptions. Within exporters, there is large dispersion in prices, costs and markups across orders and the sourcing strategy that the buyer adopts accounts for a large share of such dispersion. We show that relational buyers reward suppliers by offering higher markups and the promise of continued future trade. Marginal costs in these relationships are higher, suggesting suppliers internalize the costs of guaranteeing the timely delivery of orders up to standards. At the other end of the spectrum, non-relational buyers pay low markups and absorb monitoring costs. The overall profitability of the exporters is strongly related to their ability to sustain trade with relational buyers.
Host: Yuan Zi