Half of all transactions in the $6 trillion market for manufactured goods in the United States were intermediated by wholesalers in 2012, up from 32 percent in 1992. Seventy percent of this increase is due to disproportionate growth by the largest one
percent of wholesalers (i.e., the intensive margin). To understand the origins and implications of these findings, I develop a model that incorporates downstream buyer demand with wholesaler market entry. Structural estimates based on detailed administrative
data from the U.S. Census Bureau reveal that the rise of wholesalers was driven by an intuitive complementarity between their sourcing of goods from abroad and an expansion of their domestic distribution network to reach more buyers. Both elements require
scale economies and lead to increased wholesaler market shares and markups. Counterfactual analysis shows that despite increases in wholesaler market power, intermediated international trade has two benefits for buyers: first, through buyers’ valuation of
globally sourced products, and second, through the passed-through benefits of wholesaler economies of scale. The combined benefits of intermediated international trade in 2007 account for a $314 billion net yearly increase in buyer surplus.