The dynamics of the Swiss electricity market : three essays

Executive Summary Electricity is crucial for modern societies, thus it is important to understand the behaviour of electricity markets in order to be prepared to face the consequences of policy changes. The Swiss electricity market is now in a transition stage from a public monopoly to a liberalised market and it is undergoing an "emergent" liberalisation - i.e. liberalisation taking place without proper regulation. The withdrawal of nuclear capacity is also being debated. These two possible changes directly affect the mechanisms for capacity expansion. Thus, in this thesis we concentrate on understanding the dynamics of capacity expansion in the Swiss electricity market. A conceptual model to help understand the dynamics of capacity expansion in the Swiss electricity market is developed an explained in the first essay. We identify a potential risk of imports dependence. In the second essay a System Dynamics model, based on the conceptual model, is developed to evaluate the consequences of three scenarios: a nuclear phase-out, the implementation of a policy for avoiding imports dependence, and the combination of both. We conclude that the Swiss market is not well prepared to face unexpected changes of supply and demand, and we identify a risk of imports dependence, mainly in the case of a nuclear phase-out. The third essay focus on the opportunity cost of hydro-storage power generation, one of the main generation sources in Switzerland. We use and extended version of our model to test different policies for assigning an opportunity cost to hydro-storage power generation. We conclude that the preferred policies are different for different market participants and depend on market structure.

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.

Pliocene and Pleistocene diversification and multiple refugia in a Eurasian shrew (Crocidura suaveolens group).

We sequenced 998 base pairs (bp) of mitochondrial DNA cytochrome b and 799 bp of nuclear gene BRCA1 in the Lesser white-toothed shrew (Crocidura suaveolens group) over its geographic range from Portugal to Japan. The aims of the study were to identify the main clades within the group and respective refugia resulting from Pleistocene glaciations. Analyses revealed the Asian lesser white-toothed shrew (C. shantungensis) as the basal clade, followed by a major branch of C. suaveolens, subdivided sensu stricto into six clades, which split-up in the Upper Pliocene and Lower Pleistocene (1.9-0.9 Myr). The largest clade, occurring over a huge range from east Europe to Mongolia, shows evidence of population expansion after a bottleneck. West European clades originated from Iberian and Italo-Balkanic refugia. In the Near East, three clades evolved in an apparent hotspot of refugia (west Turkey, south-west and south-east of the Caucasus). Most clades include specimens of different morphotypes and the validity of many taxa in the C. suaveolens group has to be re-evaluated.

Trait decoupling promotes evolutionary diversification of the trophic and acoustic system of damselfishes.

Trait decoupling, wherein evolutionary release of constraints permits specialization of formerly integrated structures, represents a major conceptual framework for interpreting patterns of organismal diversity. However, few empirical tests of this hypothesis exist. A central prediction, that the tempo of morphological evolution and ecological diversification should increase following decoupling events, remains inadequately tested. In damselfishes (Pomacentridae), a ceratomandibular ligament links the hyoid bar and lower jaws, coupling two main morphofunctional units directly involved in both feeding and sound production. Here, we test the decoupling hypothesis by examining the evolutionary consequences of the loss of the ceratomandibular ligament in multiple damselfish lineages. As predicted, we find that rates of morphological evolution of trophic structures increased following the loss of the ligament. However, this increase in evolutionary rate is not associated with an increase in trophic breadth, but rather with morphofunctional specialization for the capture of zooplanktonic prey. Lineages lacking the ceratomandibular ligament also shows different acoustic signals (i.e. higher variation of pulse periods) from others, resulting in an increase of the acoustic diversity across the family. Our results support the idea that trait decoupling can increase morphological and behavioural diversity through increased specialization rather than the generation of novel ecotypes.

Comprendre les mécanismes des migrations « glo-balles » africaines. Les trajectoires transnationales et la diversification des filières

L'article décrypte certains rouages de l'expatriation des joueurs africains vers l'Europe. La précocité de leur migration et la fragmentation de leur trajectoire sont expliquées par les spéculations dont ils font l'objet. Les réseaux socio-économiques qui portent les filières spéculatives sont mis en lumière, ce qui permet de comprendre en particulier le rôle primordial qu'y jouent les clubs intermédiaires européens, et maintenant asiatiques, intermédiaires dans la chaîne à haute valeur ajoutée, au « taux d'éviction » le plus élevé du monde. This paper decodes various workings at play in the expatriation of African players to Europe. The early nature of their migration and the fragmentation of their trajectories are explained by the speculation that surrounds them. The socio-economic networks that carry speculative channels are brought to light, which helps us to understand in particular the major role played by the European, and now Asian, clubs, which serve as intermediaries in the high value-added chain, with the highest "eviction rate" in the world.

Understanding and Fighting the Medicine Counterfeit Market

Medicine counterfeiting is a serious worldwide issue, involving networks of manufacture and distribution that are an integral part of industrialized organized crime. Despite the potentially devastating health repercussions involved, legal sanctions are often inappropriate or simply not applied. The difficulty in agreeing on a definition of counterfeiting, the huge profits made by the counterfeiters and the complexity of the market are the other main reasons for the extent of the phenomenon. Above all, international cooperation is needed to thwart the spread of counterfeiting. Moreover effort is urgently required on the legal, enforcement and scientific levels. Pharmaceutical companies and agencies have developed measures to protect the medicines and allow fast and reliable analysis of the suspect products. Several means, essentially based on chromatography and spectroscopy, are now at the disposal of the analysts to enable the distinction between genuine and counterfeit products. However the determination of the components and the use of analytical data for forensic purposes still constitute a challenge. The aim of this review article is therefore to point out the intricacy of medicine counterfeiting so that a better understanding can provide solutions to fight more efficiently against it.

Proto-South-East Asia as a trigger of early angiosperm diversification

Darwin described as an 'abominable mystery' the abrupt origin of angiosperms in the mid-Cretaceous and the high diversification rates in their early history. The father of evolutionary theory could not fathom this rapid diversification and rather invoked that 'there was during long ages a small isolated continent in the S. hemisphere, which served as the birthplace of the higher plants'. In this essay, we comment on the spatial origin of angiosperms, but focus primarily on understanding the abiotic factors that promoted the early diversification of angiosperms by reviewing palaeobotanical, palaeogeographical, phylogenetics and biogeographical evidence. We argue that islands located in the region today occupied by South-East Asia played a major role in angiosperm diversification during the Late Jurassic and Early Cretaceous.

Changes in the use of broad-spectrum antibiotics after withdrawal of cefepime from the market: an interrupted time series analysis

Background and objective: Cefepime was one of the most used broad-spectrum antibiotics in Swiss public acute care hospitals. The drug was withdrawn from market in January 2007, and then replaced by a generic since October 2007. The goal of the study was to evaluate changes in the use of broad-spectrum antibiotics after the withdrawal of the cefepime original product. Design: A generalized regression-based interrupted time series model incorporating autocorrelated errors assessed how much the withdrawal changed the monthly use of other broad-spectrum antibiotics (ceftazidime, imipenem/cilastin, meropenem, piperacillin/ tazobactam) in defined daily doses (DDD)/100 bed-days from January 2004 to December 2008 [1, 2]. Setting: 10 Swiss public acute care hospitals (7 with\200 beds, 3 with 200-500 beds). Nine hospitals (group A) had a shortage of cefepime and 1 hospital had no shortage thanks to importation of cefepime from abroad. Main outcome measures: Underlying trend of use before the withdrawal, and changes in the level and in the trend of use after the withdrawal. Results: Before the withdrawal, the average estimated underlying trend (coefficient b1) for cefepime was decreasing by -0.047 (95% CI -0.086, -0.009) DDD/100 bed-days per month and was significant in three hospitals (group A, P\0.01). Cefepime withdrawal was associated with a significant increase in level of use (b2) of piperacillin/tazobactam and imipenem/cilastin in, respectively, one and five hospitals from group A. After the withdrawal, the average estimated trend (b3) was greatest for piperacillin/tazobactam (+0.043 DDD/100 bed-days per month; 95% CI -0.001, 0.089) and was significant in four hospitals from group A (P\0.05). The hospital without drug shortage showed no significant change in the trend and the level of use. The hypothesis of seasonality was rejected in all hospitals. Conclusions: The decreased use of cefepime already observed before its withdrawal from the market could be explained by pre-existing difficulty in drug supply. The withdrawal of cefepime resulted in change in level for piperacillin/tazobactam and imipenem/cilastin. Moreover, an increase in trend was found for piperacillin/tazobactam thereafter. As these changes generally occur at the price of lower bacterial susceptibility, a manufacturers' commitment to avoid shortages in the supply of their products would be important. As perspectives, we will measure the impact of the changes in cost and sensitivity rates of these antibiotics.

Self-selection and risk selection on the Swiss health insurance market

Abstract This thesis presents three empirical studies in the field of health insurance in Switzerland. First we investigate the link between health insurance coverage and health care expenditures. We use claims data for over 60 000 adult individuals covered by a major Swiss Health Insurance Fund, followed for four years; the data show a strong positive correlation between coverage and expenditures. Two methods are developed and estimated in order to separate selection effects (due to individual choice of coverage) and incentive effects ("ex post moral hazard"). The first method uses the comparison between inpatient and outpatient expenditures to identify both effects and we conclude that both selection and incentive effects are significantly present in our data. The second method is based on a structural model of joint demand of health care and health insurance and makes the most of the change in the marginal cost of health care to identify selection and incentive effects. We conclude that the correlation between insurance coverage and health care expenditures may be decomposed into the two effects: 75% may be attributed to selection, and 25 % to incentive effects. Moreover, we estimate that a decrease in the coinsurance rate from 100% to 10% increases the marginal demand for health care by about 90% and from 100% to 0% by about 150%. Secondly, having shown that selection and incentive effects exist in the Swiss health insurance market, we present the consequence of this result in the context of risk adjustment. We show that if individuals choose their insurance coverage in function of their health status (selection effect), the optimal compensations should be function of the se- lection and incentive effects. Therefore, a risk adjustment mechanism which ignores these effects, as it is the case presently in Switzerland, will miss his main goal to eliminate incentives for sickness funds to select risks. Using a simplified model, we show that the optimal compensations have to take into account the distribution of risks through the insurance plans in case of self-selection in order to avoid incentives to select risks.Then, we apply our propositions to Swiss data and propose a simple econometric procedure to control for self-selection in the estimation of the risk adjustment formula in order to compute the optimal compensations.