Demand and Supply Linkages in Exporting Multiproduct Firms

Carsten Eckel, Lisandra Flach and Ning Meng

No 18627, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Products produced by multiproduct firms can be linked through demand linkages (cannibalization), supply linkages (joint production), or both. We analyze how these within-firm linkages shape the propagation of shocks - such as tariffs - across products and markets and affect firm performance through changes in markups and marginal costs. Exploiting antidumping duties as firm-product-market specific shocks, we provide evidence of both types of linkages and quantify their relative importance. On average, two-thirds of within-firm linkages arise from demand linkages and one-third from supply linkages, with substantial heterogeneity across industries. We further estimate their effects on markups and marginal costs, showing that roughly 80% of the adjustment occurs through marginal costs and 20% through markups. Our findings indicate that disregarding either type of linkage can lead to sizable misestimations of markups and pass-through rates.

Keywords: Multiproduct firms; Cannibalization effect; Joint production; Demand Linkages; Supply Linkages; Antidumping duties; Markups (search for similar items in EconPapers)
JEL-codes: D21 D22 D24 F12 F13 F14 L11 L25 (search for similar items in EconPapers)
Date: 2023-11
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