Job Market Paper
Abstract: What is the role of market power in shaping the gains from international trade? Using Colombia’s 2011 tariff reform, I show that the welfare incidence of tariff liberalization depends on the endogenous breadth of buyers’ foreign-supplier portfolios. In transaction-level customs data, foreign suppliers absorb part of tariff cuts into higher FOB prices, but pass-through is higher for Colombian buyers with broader supplier portfolios, and buyer breadth itself expands after input-tariff cuts. In manufacturing data, output-tariff cuts compress domestic markups, while input-tariff cuts raise them, especially among initially high-markup firms. I develop an open-economy oligopoly model with bilateral input pricing and endogenous supplier breadth, and derive a sufficient statistic showing that the anticompetitive cost of input liberalization is governed by the covariance between firm-level cost relief and markup-response elasticities. Calibrating the model to Colombia, I find that endogenous buyer breadth raises welfare gains but also concentrates them among large, market-powerful firms, increasing within-industry markup dispersion.