War Signals: A Theory of Trade, Trust and Conflict

We construct a dynamic theory of civil conflict hinging on inter-ethnic trust and trade. The model economy is inhabitated by two ethnic groups. Inter-ethnic trade requires imperfectly observed bilateral investments and one group has to form beliefs on the average propensity to trade of the other group. Since conflict disrupts trade, the onset of a conflict signals that the aggressor has a low propensity to trade. Agents observe the history of conflicts and update their beliefs over time, transmitting them to the next generation. The theory bears a set of testable predictions. First, war is a stochastic process whose frequency depends on the state of endogenous beliefs. Second, the probability of future conflicts increases after each conflict episode. Third, "accidental" conflicts that do not reflect economic fundamentals can lead to a permanent breakdown of trust, plunging a society into a vicious cycle of recurrent conflicts (a war trap). The incidence of conflict can be reduced by policies abating cultural barriers, fostering inter-ethnic trade and human capital, and shifting beliefs. Coercive peace policies such as peacekeeping forces or externally imposed regime changes have instead no persistent effects.

An alternative socio-ecological strategy? International Trade Unions' engagement with climate change

In the context of a global ecological crisis, it is an important move when trade unions turn to environmentalism. Yet, the form that this environmentalism takes is often overlooked. This is especially the case with international trade unions. Based on an empirical study of international trade unions' engagement with the climate change issue, this article argues that international trade unions follow three different (and partially conflicting) strategies. I label these strategies as 'deliberative', 'collaborative growth' and 'socialist', and I examine each in turn. I argue that such analysis is important if we want to identify the potential for transforming the social relations of production that are at the root of the current climate crisis, and for identifying an alternative socio-ecological strategy.

Direct and indirect root defences of milkweed (Asclepias syriaca): trophic cascades, trade-offs and novel methods for studying subterranean herbivory

P>1. Entomopathogenic nematodes can function as indirect defence for plants that are attacked by root herbivores. By releasing volatile organic compounds (VOCs), plants signal the presence of host insects and thereby attract nematodes.2. Nonetheless, how roots deploy indirect defences, how indirect defences relate to direct defences, and the ecological consequences of root defence allocation for herbivores and plant biomass are essentially unknown.3. We investigate a natural below-ground tritrophic system, involving common milkweed, a specialist root-boring beetle and entomopathogenic nematodes, and asked whether there is a negative genetic correlation between direct defences (root cardenolides) and indirect defences (emission of volatiles in the roots and nematode attraction), and between constitutive and inducible defences.4. Volatiles of roots were analysed using two distinct sampling methods. First, we collected emissions from living Asclepias syriaca roots by dynamic headspace sampling. This method showed that attacked A. syriaca plants emit five times higher levels of volatiles than control plants. Secondly, we used a solid phase micro-extraction (SPME) method to sample the full pool of volatiles in roots for genetic correlations of volatile biosynthesis.5. Field experiments showed that entomopathogenic nematodes prevent the loss of biomass to root herbivory. Additionally, suppression of root herbivores was mediated directly by cardenolides and indirectly by the attraction of nematodes. Genetic families of plants with high cardenolides benefited less from nematodes compared to low-cardenolide families, suggesting that direct and indirect defences may be redundant. Although constitutive and induced root defences traded off within each strategy (for both direct and indirect defence, cardenolides and VOCs, respectively), we found no trade-off between the two strategies.6. Synthesis. Constitutive expression and inducibility of defences may trade off because of resource limitation or because they are redundant. Direct and indirect defences do not trade off, likely because they may not share a limiting resource and because independently they may promote defence across the patchiness of herbivore attack and nematode presence in the field. Indeed, some redundancy in strategies may be necessary to increase effective defence, but for each strategy, an economy of deployment reduces overall costs.

Financial Markets and Real Ecinomy: Four Essays in International Trade

Financial markets play an important role in an economy performing various functions like mobilizing and pooling savings, producing information about investment opportunities, screening and monitoring investments, implementation of corporate governance, diversification and management of risk. These functions influence saving rates, investment decisions, technological innovation and, therefore, have important implications for welfare. In my PhD dissertation I examine the interplay of financial and product markets by looking at different channels through which financial markets may influence an economy.My dissertation consists of four chapters. The first chapter is a co-authored work with Martin Strieborny, a PhD student from the University of Lausanne. The second chapter is a co-authored work with Melise Jaud, a PhD student from the Paris School of Economics. The third chapter is co-authored with both Melise Jaud and Martin Strieborny. The last chapter of my PhD dissertation is a single author paper.Chapter 1 of my PhD thesis analyzes the effect of financial development on growth of contract intensive industries. These industries intensively use intermediate inputs that neither can be sold on organized exchange, nor are reference-priced (Levchenko, 2007; Nunn, 2007). A typical example of a contract intensive industry would be an industry where an upstream supplier has to make investments in order to customize a product for needs of a downstream buyer. After the investment is made and the product is adjusted, the buyer may refuse to meet a commitment and trigger ex post renegotiation. Since the product is customized to the buyer's needs, the supplier cannot sell the product to a different buyer at the original price. This is referred in the literature as the holdup problem. As a consequence, the individually rational suppliers will underinvest into relationship-specific assets, hurting the downstream firms with negative consequences for aggregate growth. The standard way to mitigate the hold up problem is to write a binding contract and to rely on the legal enforcement by the state. However, even the most effective contract enforcement might fail to protect the supplier in tough times when the buyer lacks a reliable source of external financing. This suggests the potential role of financial intermediaries, banks in particular, in mitigating the incomplete contract problem. First, financial products like letters of credit and letters of guarantee can substantially decrease a risk and transaction costs of parties. Second, a bank loan can serve as a signal about a buyer's true financial situation, an upstream firm will be more willing undertake relationship-specific investment knowing that the business partner is creditworthy and will abstain from myopic behavior (Fama, 1985; von Thadden, 1995). Therefore, a well-developed financial (especially banking) system should disproportionately benefit contract intensive industries.The empirical test confirms this hypothesis. Indeed, contract intensive industries seem to grow faster in countries with a well developed financial system. Furthermore, this effect comes from a more developed banking sector rather than from a deeper stock market. These results are reaffirmed examining the effect of US bank deregulation on the growth of contract intensive industries in different states. Beyond an overall pro-growth effect, the bank deregulation seems to disproportionately benefit the industries requiring relationship-specific investments from their suppliers.Chapter 2 of my PhD focuses on the role of the financial sector in promoting exports of developing countries. In particular, it investigates how credit constraints affect the ability of firms operating in agri-food sectors of developing countries to keep exporting to foreign markets.Trade in high-value agri-food products from developing countries has expanded enormously over the last two decades offering opportunities for development. However, trade in agri-food is governed by a growing array of standards. Sanitary and Phytosanitary standards (SPS) and technical regulations impose additional sunk, fixed and operating costs along the firms' export life. Such costs may be detrimental to firms' survival, "pricing out" producers that cannot comply. The existence of these costs suggests a potential role of credit constraints in shaping the duration of trade relationships on foreign markets. A well-developed financial system provides the funds to exporters necessary to adjust production processes in order to meet quality and quantity requirements in foreign markets and to maintain long-standing trade relationships. The products with higher needs for financing should benefit the most from a well functioning financial system. This differential effect calls for a difference-in-difference approach initially proposed by Rajan and Zingales (1998). As a proxy for demand for financing of agri-food products, the sanitary risk index developed by Jaud et al. (2009) is used. The empirical literature on standards and norms show high costs of compliance, both variable and fixed, for high-value food products (Garcia-Martinez and Poole, 2004; Maskus et al., 2005). The sanitary risk index reflects the propensity of products to fail health and safety controls on the European Union (EU) market. Given the high costs of compliance, the sanitary risk index captures the demand for external financing to comply with such regulations.The prediction is empirically tested examining the export survival of different agri-food products from firms operating in Ghana, Mali, Malawi, Senegal and Tanzania. The results suggest that agri-food products that require more financing to keep up with food safety regulation of the destination market, indeed sustain longer in foreign market, when they are exported from countries with better developed financial markets.Chapter 3 analyzes the link between financial markets and efficiency of resource allocation in an economy. Producing and exporting products inconsistent with a country's factor endowments constitutes a serious misallocation of funds, which undermines competitiveness of the economy and inhibits its long term growth. In this chapter, inefficient exporting patterns are analyzed through the lens of the agency theories from the corporate finance literature. Managers may pursue projects with negative net present values because their perquisites or even their job might depend on them. Exporting activities are particularly prone to this problem. Business related to foreign markets involves both high levels of additional spending and strong incentives for managers to overinvest. Rational managers might have incentives to push for exports that use country's scarce factors which is suboptimal from a social point of view. Export subsidies might further skew the incentives towards inefficient exporting. Management can divert the export subsidies into investments promoting inefficient exporting.Corporate finance literature stresses the disciplining role of outside debt in counteracting the internal pressures to divert such "free cash flow" into unprofitable investments. Managers can lose both their reputation and the control of "their" firm if the unpaid external debt triggers a bankruptcy procedure. The threat of possible failure to satisfy debt service payments pushes the managers toward an efficient use of available resources (Jensen, 1986; Stulz, 1990; Hart and Moore, 1995). The main sources of debt financing in the most countries are banks. The disciplining role of banks might be especially important in the countries suffering from insufficient judicial quality. Banks, in pursuing their rights, rely on comparatively simple legal interventions that can be implemented even by mediocre courts. In addition to their disciplining role, banks can promote efficient exporting patterns in a more direct way by relaxing credit constraints of producers, through screening, identifying and investing in the most profitable investment projects. Therefore, a well-developed domestic financial system, and particular banking system, would help to push a country's exports towards products congruent with its comparative advantage.This prediction is tested looking at the survival of different product categories exported to US market. Products are identified according to the Euclidian distance between their revealed factor intensity and the country's factor endowments. The results suggest that products suffering from a comparative disadvantage (labour-intensive products from capital-abundant countries) survive less on the competitive US market. This pattern is stronger if the exporting country has a well-developed banking system. Thus, a strong banking sector promotes exports consistent with a country comparative advantage.Chapter 4 of my PhD thesis further examines the role of financial markets in fostering efficient resource allocation in an economy. In particular, the allocative efficiency hypothesis is investigated in the context of equity market liberalization.Many empirical studies document a positive and significant effect of financial liberalization on growth (Levchenko et al. 2009; Quinn and Toyoda 2009; Bekaert et al., 2005). However, the decrease in the cost of capital and the associated growth in investment appears rather modest in comparison to the large GDP growth effect (Bekaert and Harvey, 2005; Henry, 2000, 2003). Therefore, financial liberalization may have a positive impact on growth through its effect on the allocation of funds across firms and sectors.Free access to international capital markets allows the largest and most profitable domestic firms to borrow funds in foreign markets (Rajan and Zingales, 2003). As domestic banks loose some of their best clients, they reoptimize their lending practices seeking new clients among small and younger industrial firms. These firms are likely to be more risky than large and established companies. Screening of customers becomes prevalent as the return to screening rises. Banks, ceteris paribus, tend to focus on firms operating in comparative-advantage sectors because they are better risks. Firms in comparative-disadvantage sectors finding it harder to finance their entry into or survival in export markets either exit or refrain from entering export markets. On aggregate, one should therefore expect to see less entry, more exit, and shorter survival on export markets in those sectors after financial liberalization.The paper investigates the effect of financial liberalization on a country's export pattern by comparing the dynamics of entry and exit of different products in a country export portfolio before and after financial liberalization.The results suggest that products that lie far from the country's comparative advantage set tend to disappear relatively faster from the country's export portfolio following the liberalization of financial markets. In other words, financial liberalization tends to rebalance the composition of a country's export portfolio towards the products that intensively use the economy's abundant factors.

On Consumer Decision Strategies: New Approaches for Studying and Aiding Preferential Choices

This dissertation focuses on the strategies consumers use when making purchase decisions. It is organized in two main parts, one centering on descriptive and the other on applied decision making research. In the first part, a new process tracing tool called InterActive Process Tracing (IAPT) is pre- sented, which I developed to investigate the nature of consumers' decision strategies. This tool is a combination of several process tracing techniques, namely Active Information Search, Mouselab, and retrospective verbal protocol. To validate IAPT, two experiments on mobile phone purchase de- cisions were conducted where participants first repeatedly chose a mobile phone and then were asked to formalize their decision strategy so that it could be used to make choices for them. The choices made by the identified strategies correctly predicted the observed choices in 73% (Experiment 1) and 67% (Experiment 2) of the cases. Moreover, in Experiment 2, Mouselab and eye tracking were directly compared with respect to their impact on information search and strategy description. Only minor differences were found between these two methods. I conclude that IAPT is a useful research tool to identify choice strategies, and that using eye tracking technology did not increase its validity beyond that gained with Mouselab. In the second part, a prototype of a decision aid is introduced that was developed building in particular on the knowledge about consumers' decision strategies gained in Part I. This decision aid, which is called the InterActive Choice Aid (IACA), systematically assists consumers in their purchase decisions. To evaluate the prototype regarding its perceived utility, an experiment was conducted where IACA was compared to two other prototypes that were based on real-world consumer decision aids. All three prototypes differed in the number and type of tools they provided to facilitate the process of choosing, ranging from low (Amazon) to medium (Sunrise/dpreview) to high functionality (IACA). Overall, participants slightly preferred the prototype of medium functionality and this prototype was also rated best on the dimensions of understandability and ease of use. IACA was rated best regarding the two dimensions of ease of elimination and ease of comparison of alternatives. Moreover, participants choices were more in line with the normatively oriented weighted additive strategy when they used IACA than when they used the medium functionality prototype. The low functionality prototype was the least preferred overall. It is concluded that consumers can and will benefit from highly functional decision aids like IACA, but only when these systems are easy to understand and to use.

Learning ability and longevity: a symmetrical evolutionary trade-off in Drosophila.

Learning ability can be substantially improved by artificial selection in animals ranging from Drosophila to rats. Thus these species have not used their evolutionary potential with respect to learning ability, despite intuitively expected and experimentally demonstrated adaptive advantages of learning. This suggests that learning is costly, but this notion has rarely been tested. Here we report correlated responses of life-history traits to selection for improved learning in Drosophila melanogaster. Replicate populations selected for improved learning lived on average 15% shorter than the corresponding unselected control populations. They also showed a minor reduction in fecundity late in life and possibly a minor increase in dry adult mass. Selection for improved learning had no effect on egg-to-adult viability, development rate, or desiccation resistance. Because shortened longevity was the strongest correlated response to selection for improved learning, we also measured learning ability in another set of replicate populations that had been selected for extended longevity. In a classical olfactory conditioning assay, these long-lived flies showed an almost 40% reduction in learning ability early in life. This effect disappeared with age. Our results suggest a symmetrical evolutionary trade-off between learning ability and longevity in Drosophila.

Preferential synthesis of prostaglandin D2 by neurons and prostaglandin E2 by fibroblasts and nonneuronal cells in chick dorsal root ganglia.

To determine the type and the relative amount of prostaglandins (PGs) synthesized by various neural tissues, homogenates of meninges, dorsal root ganglia (DRG) capsules, decapsulated DRG, and unsheathed sciatic nerves were incubated with [1-14C]arachidonic acid. Homogenates of cultured cells (meningeal cells, fibroblasts, and nonneuronal or neuronal DRG cells) were used to specify the cells producing particular PGs. The highest synthetic capacity was found in fibroblast-rich tissues (meninges and DRG capsules) and in cultures of meningeal cells or fibroblasts. Two major cyclooxygenase products were formed: [14C]PGE2 and an unusual 14C-labeled compound, Y. The accumulation of compound Y, corresponding probably to 15-hydroperoxy PGE2, was completely impaired by addition of exogenous GSH, which conversely enhanced the synthesis of [14C]PGE2 and promoted the formation of [14C]PGD2. In contrast, decapsulated DRG or unsheathed sciatic nerves displayed a 10-20 times lower capacity to synthesize PGs than fibroblast-rich tissues and produced mainly [14C]PGE2 and [14C]PGD2. In this case, [14C]PGE2 or [14C]PGD2 synthesis was neither enhanced nor promoted by addition of exogenous GSH. Neuron-enriched DRG cell cultures allowed us to specify that [14C]PGD2 is the major prostanoid produced by primary sensory neurons as compared with nonneuronal DRG cells. Because PGD2 synthesis in DRG and more specifically in DRG neurons does not depend on exogenous GSH and differs from PGD2 synthesis in fibroblast-rich tissues, it is concluded that at least two distinct enzymatic processes contribute to PGD2 formation in the nervous system.(ABSTRACT TRUNCATED AT 250 WORDS)

Preferential binding of mouse mammary tumor virus to B lymphocytes.

Mouse mammary tumor virus (MMTV) has been shown to preferentially infect B lymphocytes in vivo. We have used recombinant envelope-coated fluospheres and highly purified MMTV particles to study the distribution of the viral receptors on fresh mouse lymphocytes. A preferential dose-dependent binding to B lymphocytes was observed which could be competed with neutralizing antibodies. In contrast, T-lymphocyte binding remained at background levels. These results strongly suggest a higher density of viral receptor molecules on B lymphocytes than on T lymphocytes and correlate with the preferential initial infection of B lymphocytes observed in vivo.

Looking for orders of magnitude : five essays in trade and the environment and economic geography

General Summary Although the chapters of this thesis address a variety of issues, the principal aim is common: test economic ideas in an international economic context. The intention has been to supply empirical findings using the largest suitable data sets and making use of the most appropriate empirical techniques. This thesis can roughly be divided into two parts: the first one, corresponding to the first two chapters, investigates the link between trade and the environment, the second one, the last three chapters, is related to economic geography issues. Environmental problems are omnipresent in the daily press nowadays and one of the arguments put forward is that globalisation causes severe environmental problems through the reallocation of investments and production to countries with less stringent environmental regulations. A measure of the amplitude of this undesirable effect is provided in the first part. The third and the fourth chapters explore the productivity effects of agglomeration. The computed spillover effects between different sectors indicate how cluster-formation might be productivity enhancing. The last chapter is not about how to better understand the world but how to measure it and it was just a great pleasure to work on it. "The Economist" writes every week about the impressive population and economic growth observed in China and India, and everybody agrees that the world's center of gravity has shifted. But by how much and how fast did it shift? An answer is given in the last part, which proposes a global measure for the location of world production and allows to visualize our results in Google Earth. A short summary of each of the five chapters is provided below. The first chapter, entitled "Unraveling the World-Wide Pollution-Haven Effect" investigates the relative strength of the pollution haven effect (PH, comparative advantage in dirty products due to differences in environmental regulation) and the factor endowment effect (FE, comparative advantage in dirty, capital intensive products due to differences in endowments). We compute the pollution content of imports using the IPPS coefficients (for three pollutants, namely biological oxygen demand, sulphur dioxide and toxic pollution intensity for all manufacturing sectors) provided by the World Bank and use a gravity-type framework to isolate the two above mentioned effects. Our study covers 48 countries that can be classified into 29 Southern and 19 Northern countries and uses the lead content of gasoline as proxy for environmental stringency. For North-South trade we find significant PH and FE effects going in the expected, opposite directions and being of similar magnitude. However, when looking at world trade, the effects become very small because of the high North-North trade share, where we have no a priori expectations about the signs of these effects. Therefore popular fears about the trade effects of differences in environmental regulations might by exaggerated. The second chapter is entitled "Is trade bad for the Environment? Decomposing worldwide SO2 emissions, 1990-2000". First we construct a novel and large database containing reasonable estimates of SO2 emission intensities per unit labor that vary across countries, periods and manufacturing sectors. Then we use these original data (covering 31 developed and 31 developing countries) to decompose the worldwide SO2 emissions into the three well known dynamic effects (scale, technique and composition effect). We find that the positive scale (+9,5%) and the negative technique (-12.5%) effect are the main driving forces of emission changes. Composition effects between countries and sectors are smaller, both negative and of similar magnitude (-3.5% each). Given that trade matters via the composition effects this means that trade reduces total emissions. We next construct, in a first experiment, a hypothetical world where no trade happens, i.e. each country produces its imports at home and does no longer produce its exports. The difference between the actual and this no-trade world allows us (under the omission of price effects) to compute a static first-order trade effect. The latter now increases total world emissions because it allows, on average, dirty countries to specialize in dirty products. However, this effect is smaller (3.5%) in 2000 than in 1990 (10%), in line with the negative dynamic composition effect identified in the previous exercise. We then propose a second experiment, comparing effective emissions with the maximum or minimum possible level of SO2 emissions. These hypothetical levels of emissions are obtained by reallocating labour accordingly across sectors within each country (under the country-employment and the world industry-production constraints). Using linear programming techniques, we show that emissions are reduced by 90% with respect to the worst case, but that they could still be reduced further by another 80% if emissions were to be minimized. The findings from this chapter go together with those from chapter one in the sense that trade-induced composition effect do not seem to be the main source of pollution, at least in the recent past. Going now to the economic geography part of this thesis, the third chapter, entitled "A Dynamic Model with Sectoral Agglomeration Effects" consists of a short note that derives the theoretical model estimated in the fourth chapter. The derivation is directly based on the multi-regional framework by Ciccone (2002) but extends it in order to include sectoral disaggregation and a temporal dimension. This allows us formally to write present productivity as a function of past productivity and other contemporaneous and past control variables. The fourth chapter entitled "Sectoral Agglomeration Effects in a Panel of European Regions" takes the final equation derived in chapter three to the data. We investigate the empirical link between density and labour productivity based on regional data (245 NUTS-2 regions over the period 1980-2003). Using dynamic panel techniques allows us to control for the possible endogeneity of density and for region specific effects. We find a positive long run elasticity of density with respect to labour productivity of about 13%. When using data at the sectoral level it seems that positive cross-sector and negative own-sector externalities are present in manufacturing while financial services display strong positive own-sector effects. The fifth and last chapter entitled "Is the World's Economic Center of Gravity Already in Asia?" computes the world economic, demographic and geographic center of gravity for 1975-2004 and compares them. Based on data for the largest cities in the world and using the physical concept of center of mass, we find that the world's economic center of gravity is still located in Europe, even though there is a clear shift towards Asia. To sum up, this thesis makes three main contributions. First, it provides new estimates of orders of magnitudes for the role of trade in the globalisation and environment debate. Second, it computes reliable and disaggregated elasticities for the effect of density on labour productivity in European regions. Third, it allows us, in a geometrically rigorous way, to track the path of the world's economic center of gravity.

Detection and Characterization of Preferential Flow Paths in the Downstream Area of a Hazardous Landfill

We have used surface-based electrical resistivity tomography to detect and characterize preferential hydraulic pathways in the immediate downstream area of an abandoned, hazardous landfill. The landfill occupies the void left by a former gravel pit and its base is close to the groundwater table and lacking an engineered barrier. As such, this site is remarkably typical of many small- to medium-sized waste deposits throughout the densely populated and heavily industrialized foreland on both sides of the Alpine arc. Outflows of pollutants lastingly contaminated local drinking water supplies and necessitated a partial remediation in the form of a synthetic cover barrier, which is meant to prevent meteoric water from percolating through the waste before reaching the groundwater table. Any future additional isolation of the landfill in the form of lateral barriers thus requires adequate knowledge of potential preferential hydraulic pathways for outflowing contaminants. Our results, inferred from a suite of tomographically inverted surfaced-based electrical resistivity profiles oriented roughly perpendicular to the local hydraulic gradient, indicate that potential contaminant outflows would predominantly occur along an unexploited lateral extension of the original gravel deposit. This finds its expression as a distinct and laterally continuous high-resistivity anomaly in the resistivity tomograms. This interpretation is ground-truthed through a litholog from a nearby well. Since the probed glacio-fluvial deposits are largely devoid of mineralogical clay, the geometry of hydraulic and electrical pathways across the pore space of a given lithological unit can be assumed to be identical, which allows for an order-of-magnitude estimation of the overall permeability structure. These estimates indicate that the permeability of the imaged extension of the gravel body is at least two to three orders-of-magnitude higher than that of its finer-grained embedding matrix. This corroborates the preeminent role of the high-resistivity anomaly as a potential preferential flow path.