I. Introduction Recent studies show that market power, as measured by markups (i.e., firms’ abilities to charge prices above their marginal costs), tends to be rising globally. 1) This change has been mainly driven by advanced economies, however, and the trend in developing countries is mixed (De Loecker & Eeckhout, 2018; Diez et al., 2019). The emergence of global value chains (GVCs) is likely to have contributed to this phenomenon, as the fragmentation of production and changing trade patterns have influenced the competition that countries, industries, and firms face. The share of GVC 2) trade (i.e., global exports that flow across at least two borders) in total world trade rose rapidly from about 40 percent in 1990 to 50 percent prior to the financial crisis Journal of Economic Integration Vol. 36, No. 3, September 2021, 491-517 https://doi.org/10.11130/jei.2021.36.3.491 ⓒ 2021-Center for Economic Integration, Sejong University, All Rights Reserved. pISSN: 1225-651X eISSN: 1976-5525 Global Value Chain Participation, Competition, and Markups: Evidence from Ethiopian Manufacturing Firms Jieun Choi 1 , Emiko Fukase 1+ , and Albert G. Zeufack 1 1 World Bank, USA Abstract This study uses detailed manufacturing census panel data for 2000 to 2014 to explore the relationship between Ethiopian firms’ global value chain (GVC) participation and markups. We find that GVC firms, defined as firms involved in both exporting and importing intermediate inputs, tend to have lower markups relative to non-trading firms and firms that are involved only in material imports. Moreover, the more intensely a firm is integrated into a GVC (measured by the share of export value added and imported inputs in total sales), the lower its markup is. Finally, we explore competition effects at the industry level and find that firms operating in industries with a relatively high GVC presence and suppliers selling inputs to such industries tend to have lower markups owing to horizontal competition and backward linkages, respectively. All of these findings suggest that GVC participation is associated with greater competition for Ethiopian firms. Keywords: competition, Ethiopia, global value chain, markup JEL Classifications: D22, F14, F61, L11, O14 Received 28 November 2020, Revised 18 June 2021, Accepted 23 July 2021 +Corresponding Author: Emiko Fukase Consultant, World Bank, 1818 H Street, NW, Washington DC, 20433, USA. Tel: +1-917-873-4053. Email: efukase@worldbank.org/emikof2@aol.com Co-Author: Jieun Choi Senior Economist, World Bank, 1818 H Street, NW, Washington DC, 20433, USA. Email: jieunchoi1121@gmail.com Co-Author: Albert G. Zeufack Chief Economist, World Bank, 1818 H Street, NW, Washington DC, 20433, USA. Email: azeufack@worldbank.org