Participation in global value chains (GVCs) and markups: firm evidence from six European countries

We examine the relationship between firms’ participation in global value chains (GVCs) and price markups. Utilizing data from 14,316 firms across six European nations sourced from AMADEUS data linked to the EFIGE project, we observe significant diversity among countries and industries regarding firm-specific, time-varying markups. After mitigating sample selection bias through coarsened exact matching (CEM), we discover that firms involved in exporting produced-to-order goods and importing service and material inputs have a markup premium 3 and 4% higher than non-trading firms. Our findings remain robust to alternative definitions of GVC participation, different data matching techniques (propensity score matching), and different markup estimates. These results contribute to the limited but increasingly crucial literature on markup disparities, offering valuable insights for crafting industrial policies.