Trade Liberalization, Heterogeneous Firms and Industrial Dynamics

This master thesis studies how trade liberalization affects the firm-level productivity and industrial evolution. To do so, I built a dynamic model that considers firm-level productivity as endogenous to investigate the influence of trade on firm’s productivity and the market structure. In the framework, heterogeneous firms in the same industry operate differently in equilibrium. Specifically, firms are ex ante identical but heterogeneity arises as an equilibrium outcome. Under the setting of monopolistic competition, this type of model yields an industry that is represented not by a steady-state outcome, but by an evolution that rely on the decisions made by individual firms. I prove that trade liberalization has a general positive impact on technological adoption rates and hence increases the firm-level productivity. Besides, this endogenous technology adoption model also captures the stylized facts: exporting firms are larger and more productive than their non-exporting counterparts in the same sector. I assume that the number of firms is endogenous, since, according to the empirical literature, the industrial evolution shows considerably different patterns across countries; some industries experience large scale of firms’ exit in the period of contracting market shares, while some industries display relative stable number of firms or gradually increase quantities. The special word “shakeout” is used to describe the dramatic decrease in the number of firms. In order to explain the causes of shakeout, I construct a model where forward-looking firms decide to enter and exit the market on the basis of their state of technology. In equilibrium, firms choose different dates to adopt innovation which generate a gradual diffusion process. It is exactly this gradual diffusion process that generates the rapid, large-scale exit phenomenon. Specifically, it demonstrates that there is a positive feedback between firm’s exit and adoption, the reduction in the number of firms increases the incentives for remaining firms to adopt innovation. Therefore, in the setting of complete information, this model not only generates a shakeout but also captures the stability of an industry. However, the solely national view of industrial evolution neglects the importance of international trade in determining the shape of market structure. In particular, I show that the higher trade barriers lead to more fragile markets, encouraging the over-entry in the initial stage of industry life cycle and raising the probability of a shakeout. Therefore, more liberalized trade generates more stable market structure from both national and international viewpoints. The main references are Ederington and McCalman(2008,2009).

International Portfolio Investments and The Informational Value of Trade

A large volume of literature suggests that information asymmetry resulting from the spatial separation between investors and investments have a significant impact on the composition of investors’ domestic and international portfolios. I show that institutional factors affecting trading in tangible goods help explain a substantial portion of investors’ spatial bias. More importantly, I demonstrate that an information flow medium with breadth and richness directly linked to the bilateral commitment of resources between countries, that I measure by their trading intensity in tangible goods, is consistent with the prevailing country allocation in investors’ international portfolios.

Puunoston kehittäminen Stora Enso Metsän Helsingin palvelupisteessä

The operation environment in the roundwood trade in Finland in the 1990’s include several changes. They are changes in the structure of non-industrial private forest (NIPF) ownership, forest taxation, in forest legislation, in price recommendation agreement, diminishing resources of forestry extension services, etc. At the same time, the roundwood demand has been rising. All these developments cause uncertainty in wood procurement organisations, and call for research to find out how to adapt into the changing environment. The objective of this study is to produce information for roundwood purchasing planning and cus-tomer satisfaction management to be used by Stora Enso Metsä Customer Service, Helsinki. For this pur-pose, data needs to be gathered about the urban NIPFs and their forest estates, behaviour related to forestry and timber-selling, customer satisfaction in their latest timber selling transaction, and their opinions about Enso’s new customer service office and its service concept. To fulfil the objective of the study, a NIPF -owner -survey (N=1064, response rate 39,7%) was con-ducted in October 1998-January 1999. The sample was made on the basis of the marketing database of Stora Enso Oyj Forest Customer Service in Helsinki. In planning the frame of reference of the empirical study, the model of service quality by Grönroos was applied. The following aspects were included in the 7-page questionnaire: demographic, sosio-economic and forest estate background, relation to the forest service supply, behaviour related to forestry, timber-selling motives and behaviour, last contact organisation and its image in forestry business, expectations and percep-tions in the latest timber-selling transactions, and behavioural intentions. The results revealed that the share of women, pensioners and academically educated people among forest owners was quite high. The majority of the forest estates of the metropolitan forest owners were situ-ated in the provinces of South Finland and East Finland. The average forest estate area was considerably smaller than in a previous study. Economic and recreational objectives were most important in the use of forests. Forest Associations were involved in half of the roundwood sales transactions of the respondents in the metropolitan area. The wood quantity of transactions was considerably higher than the average in the whole country. Bank-organised forest-related activities, taxation infos and trips to the forest were the most popular activities. Among the services, silvicultural advices were needed mostly and stub treatment least. Brochure material related to stumpage timber sales and taxation were considered most important compared to material related to delivery sales. The service expectations were at highest for women and they were less satisfied with the service than men. 2nd and 3rd generation residents of the metropolitan area thought about the new customer service concept more positively than the 1st generation residents. Internet users under 60 years thought more positively about new satellite picture-based woodlot search concept. Cross-tabulation of factor scores against background variables indicated that women with relatively low education level a greater need to sell roundwood than entrepreneurs, white-collar workers and directors, and Internet users. Suspiciousness towards timber procurement organisations was relatively strong among women and those whose forest income share of the total income was either null or over 20 %. The average customer satisfaction score was negative in all nine questions. Statistical differences be-tween different companies did not exist in the average satisfaction scores. Stora Enso’s Helsinki forest cus-tomer service could choose the ability to purchase all timber grades as its competitive advantage. Out of nine service dimension included in the questionnaire, in this particular service dimension, Enso’s Helsinki forest customer service’s score exceeded most all organisations’ average customer satisfaction score. On the basis of importance – performance matrix, advice and quidance could have been provided more to the forest owners in their latest timber–selling transaction.

Phytophthora in Finnish nurseries

Human-mediated movement of plants and plant products is now generally accepted to be the primary mode of introduction of plant pathogens. Species of the genus Phytophthora are commonly spread in this way and have caused severe epidemics in silviculture, horticulture as well as natural systems all over the world. The aims of the study were to gather information on the occurrence of Phytophthora spp. in Finnish nurseries, to produce information for risk assessments for these Phytophthora spp. by determining their host ranges and tolerance of cold temperatures, and to establish molecular means for their detection. Phytophthora cactorum was found to persist in natural waterbodies and results suggest that irrigation water might be a source of inoculum in nurseries. In addition to P. cactorum, isolates from ornamental nursery Rhododendron yielded three species new to Finland: P. ramorum, P. plurivora and P. pini. The only species with quarantine status, P. ramorum, was most adapted to growth in cold temperatures and able to persist in the nursery in spite of an annual sanitation protocol. Phytophthora plurivora and the closely related P. pini had more hosts among Nordic tree and plant species than P. ramorum and P. cactorum, and also had higher infectivity rates. All four species survived two weeks in -5 °C , and thus soil survival of these Phytophthoras in Finland is likely under current climatic conditions. The most common tree species in Finnish nurseries, Picea abies, was highly susceptible to P. plurivora and P. pini in pathogenicity trials. In a histological examination of P. plurivora in P. abies shoot tissues, fast necrotrophic growth was observed in nearly all tissues. The production of propagules in P. abies shoot tissue was only weakly indicated. In this study, a PCR DGGE technique was developed for simultaneous detection and identification of Phytophthora spp. It reliably detected Phytophthora in plant tissues and could discriminate most test species as well as indicate instances of multiple-species infections. It proved to be a useful detection and identification tool either applied alone or in concert with traditional isolation culture techniques. All of the introduced species of Phytophthora had properties that promote a high risk of establishment and spread in Finland. It is probable that more pathogens of this genus will be introduced and become established in Finland and other Nordic countries unless efficient phytosanitary control becomes standard practice in the international plant trade.

Jatrophanviljely ja maankäyttö Vietnamissa

Biofuels are under discussion all over the world today. There are fears that the farming of biofuel plants hurts food production and weakens the food security of the poor. On the other hand, biofuel production could lessen the green house gas emissions caused by transportation, and it could also spread the profits from fuel markets more evenly between countries. The aim of this thesis is to find out how an oil plant called jatropha curcas L., which is used for biodiesel production, can affect the sustainability of livelihoods in Vietnam from the point of view of land use. Special attention is given to the effects of jatropha farming on food production, land productivity, natural resources of livelihoods and global livelihood. Jatropha belongs to the family Euphorbiaceae, and it grows naturally in tropical and subtropical areas. It can be grown on poor soils, its seeds have high oil content, and it cannot be eaten due to its toxicity. The plant grows naturally in Vietnam, and during the past few years it has also begun to be farmed for making biodiesel. Population growth in Vietnam has slowed down, but the population's standard of living and energy consumption are still rising quickly. An interest in the international biodiesel markets has awoken following Vietnam's opening up to international trade. Jatropha diesel plays a significant part in Vietnam’s clean fuel strategy, and many companies have set up jatropha plantations to produce raw material for biodiesel. Diesel made from jatropha is planned to be used both locally and for export. This thesis uses a theoretical concept of sustainable livelihoods. According to the theory, the resources that people have shape their livelihood possibilities. Farming of jatropha affects the livelihoods of people especially through land use, as land use changes have effects on many of the livelihood resources. In addition to the written sources, the material of the thesis is based on 14 interviews in Vietnam and Finland, and on observation during a field trip to Northern Vietnam in the spring of 2008. The results of the thesis show that jatropha diesel can support the sustainability of livelihoods at different scales if it is produced with deliberation. However, positive results are only possible if decisions are made carefully and more experience is collected. The possibilities of sustainable jatropha farming depend mainly on the previous land use methods and ways of production. Farming of jatropha does not threaten food production in Vietnam if the farming plans are implemented as planned. Jatropha may take some land from cassava, but at the same time, food production can be increased if mixed farming is used on some farms. Plenty of new research information and practical experiences on jatropha farming has to be collected before results of the real sustainability of the farming are ready. Carefully considered continuation and documentation of present and future projects would help to understand the possibilities of jatropha diesel in Vietnam and elsewhere.

Trade Blocs and the Cold War : The CMEA and the EC challenge, 1969-1976

The coherence of the Soviet bloc was seriously tested at the turn of the 1970s, as the Soviet Union and its allies engaged in intensive negotiations over their relations with the European Communities (EC). In an effort to secure their own national economic interests many East European countries began independent manoeuvres against the wishes of their bloc leader. However, much of the intra-bloc controversy was kept out of the public eye, as the battle largely took place behind the scenes, within the organisation for economic cooperation, the Council for Mutual Economic Assistance (CMEA). The CMEA policy-making process vis-à-vis the EC is described in this study with reference to primary archival materials. This study investigates the negotiating positions and powers of the CMEA member states in their efforts to deal with the economic challenge created by the progress of the EC, as it advanced towards the customs union. This entails an analysis of the functioning principles and performance of the CMEA machinery. The study traces the CMEA negotiations that began in 1970 over its policy toward the EC. The policy was finally adopted in 1974, and was followed by the first official meeting between the two organisations in early 1975. The story ends in 1976, when the CMEA s efforts to enter into working relations with the EC were seemingly frustrated by the latter. The first major finding of the study is that, contrary to much of the prior research, the Soviet Union was not in a hegemonic position vis-à-vis its allies. It had to use a lot of its resources to tame the independent manoeuvring of its smaller allies. Thus, the USSR was not the kind of bloc leader that the totalitarian literature has described. Because the Soviet Union had to spend so much attention on its own bloc-politics, it was not able to concentrate on formulating a policy vis-à-vis the EC. Thus, the Soviet leadership was dependent on its allies in those instances when the socialist countries needed to act as a bloc. This consequently opened up the possibility for the USSR s allies to manoeuvre. This study also argues that when the CMEA did manage to find a united position, it was a force that the EC had to reckon with in its policy-making. This was particularly the case in the implementation of the EC Common Commercial Policy. The other main finding of the study is that, although it has been largely neglected in the previous literature on the history of West European integration, the CMEA did in fact have an effect on EC decision-making. This study shows how for political and ideological reasons the CMEA members did not acknowledge the EC s supranational authority. Therefore the EC had no choice but to refrain from implementing its Common Commercial Policy in full.