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Laura Boudreau, Columbia Business School

Empirical Microeconomics

Friday, March 22, 2024, 01:30pm - 03:00pm

“Relationships and Responsibility”

International buyers vary in their sourcing strategies, with some adopting “relational” strategies that entail sourcing from fewer suppliers and providing higher rents (Cajal-Grossi, Macchiavello, and Noguera, 2023), and others adopting more "spot" strategies that entail sourcing from many suppliers and providing lower rents. Relational sourcing is positively correlated with "Just-in-time" (JIT) sourcing, in which buyers aim to receive goods from suppliers only as they are needed (Cajal-Grossi, Del Prete, and Macchiavello, 2023). We hypothesize that exposure to relational and/or JIT buyers causes exporters to invest in capabilities to build stronger relationships with their workers (Gibbons and Henderson, 2012) and in better working conditions. We consider that this may be because these buyers demand reliable supply in the face of suppliers' experience of adverse shocks, or it may be due to other features of trade with relational buyers, such as trust built in relationships that mitigates the adverse effects of negative shocks on both parties. We document that workers employed by Bangladeshi garment exporters that supply to relational buyers, but not to JIT buyers, experience better working conditions. Using the COVID-19 pandemic as an unanticipated, negative demand shock, we show that relational buyers canceled more orders but behaved more responsibly toward suppliers and were less likely to permanently drop suppliers compared to JIT-only and spot buyers. Workers employed in plants supplying to relational buyers prior to the pandemic were significantly less likely to experience unemployment during the pandemic, and consequently, experienced lower income losses. This evidence is consistent with mechanisms other than reliability explaining the better outcomes for workers employed by exporters selling to relational buyers. 

1:30pm-3:00pm | In Person, 3rd Floor Library, NJ Hall | Coordinators: Tom Prusa & Hector Blanco Fernandez

Location  In Person, 3rd Floor Library, NJ Hall
Contact  Tom Prusa & Hector Blanco Fernandez