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.

Rules of origin : from analysis to reform

General Introduction This thesis can be divided into two main parts :the first one, corresponding to the first three chapters, studies Rules of Origin (RoOs) in Preferential Trade Agreements (PTAs); the second part -the fourth chapter- is concerned with Anti-Dumping (AD) measures. Despite wide-ranging preferential access granted to developing countries by industrial ones under North-South Trade Agreements -whether reciprocal, like the Europe Agreements (EAs) or NAFTA, or not, such as the GSP, AGOA, or EBA-, it has been claimed that the benefits from improved market access keep falling short of the full potential benefits. RoOs are largely regarded as a primary cause of the under-utilization of improved market access of PTAs. RoOs are the rules that determine the eligibility of goods to preferential treatment. Their economic justification is to prevent trade deflection, i.e. to prevent non-preferred exporters from using the tariff preferences. However, they are complex, cost raising and cumbersome, and can be manipulated by organised special interest groups. As a result, RoOs can restrain trade beyond what it is needed to prevent trade deflection and hence restrict market access in a statistically significant and quantitatively large proportion. Part l In order to further our understanding of the effects of RoOs in PTAs, the first chapter, written with Pr. Olivier Cadot, Celine Carrère and Pr. Jaime de Melo, describes and evaluates the RoOs governing EU and US PTAs. It draws on utilization-rate data for Mexican exports to the US in 2001 and on similar data for ACP exports to the EU in 2002. The paper makes two contributions. First, we construct an R-index of restrictiveness of RoOs along the lines first proposed by Estevadeordal (2000) for NAFTA, modifying it and extending it for the EU's single-list (SL). This synthetic R-index is then used to compare Roos under NAFTA and PANEURO. The two main findings of the chapter are as follows. First, it shows, in the case of PANEURO, that the R-index is useful to summarize how countries are differently affected by the same set of RoOs because of their different export baskets to the EU. Second, it is shown that the Rindex is a relatively reliable statistic in the sense that, subject to caveats, after controlling for the extent of tariff preference at the tariff-line level, it accounts for differences in utilization rates at the tariff line level. Finally, together with utilization rates, the index can be used to estimate total compliance costs of RoOs. The second chapter proposes a reform of preferential Roos with the aim of making them more transparent and less discriminatory. Such a reform would make preferential blocs more "cross-compatible" and would therefore facilitate cumulation. It would also contribute to move regionalism toward more openness and hence to make it more compatible with the multilateral trading system. It focuses on NAFTA, one of the most restrictive FTAs (see Estevadeordal and Suominen 2006), and proposes a way forward that is close in spirit to what the EU Commission is considering for the PANEURO system. In a nutshell, the idea is to replace the current array of RoOs by a single instrument- Maximum Foreign Content (MFC). An MFC is a conceptually clear and transparent instrument, like a tariff. Therefore changing all instruments into an MFC would bring improved transparency pretty much like the "tariffication" of NTBs. The methodology for this exercise is as follows: In step 1, I estimate the relationship between utilization rates, tariff preferences and RoOs. In step 2, I retrieve the estimates and invert the relationship to get a simulated MFC that gives, line by line, the same utilization rate as the old array of Roos. In step 3, I calculate the trade-weighted average of the simulated MFC across all lines to get an overall equivalent of the current system and explore the possibility of setting this unique instrument at a uniform rate across lines. This would have two advantages. First, like a uniform tariff, a uniform MFC would make it difficult for lobbies to manipulate the instrument at the margin. This argument is standard in the political-economy literature and has been used time and again in support of reductions in the variance of tariffs (together with standard welfare considerations). Second, uniformity across lines is the only way to eliminate the indirect source of discrimination alluded to earlier. Only if two countries face uniform RoOs and tariff preference will they face uniform incentives irrespective of their initial export structure. The result of this exercise is striking: the average simulated MFC is 25% of good value, a very low (i.e. restrictive) level, confirming Estevadeordal and Suominen's critical assessment of NAFTA's RoOs. Adopting a uniform MFC would imply a relaxation from the benchmark level for sectors like chemicals or textiles & apparel, and a stiffening for wood products, papers and base metals. Overall, however, the changes are not drastic, suggesting perhaps only moderate resistance to change from special interests. The third chapter of the thesis considers whether Europe Agreements of the EU, with the current sets of RoOs, could be the potential model for future EU-centered PTAs. First, I have studied and coded at the six-digit level of the Harmonised System (HS) .both the old RoOs -used before 1997- and the "Single list" Roos -used since 1997. Second, using a Constant Elasticity Transformation function where CEEC exporters smoothly mix sales between the EU and the rest of the world by comparing producer prices on each market, I have estimated the trade effects of the EU RoOs. The estimates suggest that much of the market access conferred by the EAs -outside sensitive sectors- was undone by the cost-raising effects of RoOs. The chapter also contains an analysis of the evolution of the CEECs' trade with the EU from post-communism to accession. Part II The last chapter of the thesis is concerned with anti-dumping, another trade-policy instrument having the effect of reducing market access. In 1995, the Uruguay Round introduced in the Anti-Dumping Agreement (ADA) a mandatory "sunset-review" clause (Article 11.3 ADA) under which anti-dumping measures should be reviewed no later than five years from their imposition and terminated unless there was a serious risk of resumption of injurious dumping. The last chapter, written with Pr. Olivier Cadot and Pr. Jaime de Melo, uses a new database on Anti-Dumping (AD) measures worldwide to assess whether the sunset-review agreement had any effect. The question we address is whether the WTO Agreement succeeded in imposing the discipline of a five-year cycle on AD measures and, ultimately, in curbing their length. Two methods are used; count data analysis and survival analysis. First, using Poisson and Negative Binomial regressions, the count of AD measures' revocations is regressed on (inter alia) the count of "initiations" lagged five years. The analysis yields a coefficient on measures' initiations lagged five years that is larger and more precisely estimated after the agreement than before, suggesting some effect. However the coefficient estimate is nowhere near the value that would give a one-for-one relationship between initiations and revocations after five years. We also find that (i) if the agreement affected EU AD practices, the effect went the wrong way, the five-year cycle being quantitatively weaker after the agreement than before; (ii) the agreement had no visible effect on the United States except for aone-time peak in 2000, suggesting a mopping-up of old cases. Second, the survival analysis of AD measures around the world suggests a shortening of their expected lifetime after the agreement, and this shortening effect (a downward shift in the survival function postagreement) was larger and more significant for measures targeted at WTO members than for those targeted at non-members (for which WTO disciplines do not bind), suggesting that compliance was de jure. A difference-in-differences Cox regression confirms this diagnosis: controlling for the countries imposing the measures, for the investigated countries and for the products' sector, we find a larger increase in the hazard rate of AD measures covered by the Agreement than for other measures.

Toward a Statistically Robust Assessment of Social and Solidarity Economy Actors. Conceptual Development and Empirical Validation

Many definitions and debates exist about the core characteristics of social and solidarity economy (SSE) and its actors. Among others, legal forms, profit, geographical scope, and size as criteria for identifying SSE actors often reveal dissents among SSE scholars. Instead of using a dichotomous, either-in-or-out definition of SSE actors, this paper presents an assessment tool that takes into account multiple dimensions to offer a more comprehensive and nuanced view of the field. We first define the core dimensions of the assessment tool by synthesizing the multiple indicators found in the literature. We then empirically test these dimensions and their interrelatedness and seek to identify potential clusters of actors. Finally we discuss the practical implications of our model.

Risk reduction practices in men who have sex with men in Switzerland: serosorting, strategic positioning, and withdrawal before ejaculation.

The aim of this study was to identify predictors of intentional use of the HIV risk reduction practices of serosorting, strategic positioning, and withdrawal before ejaculation during unprotected anal intercourse (UAI) with casual partners. A cross-sectional survey pertaining to the Swiss HIV behavioral surveillance system, using an anonymous self-administered questionnaire, was conducted in 2007 in a self-selected sample of men having sex with other men (MSM). Analysis was restricted to participants with UAI with casual partner(s) (N = 410). Logistic regression was used to estimate factors associated with intentional use of serosorting, strategic positioning, and withdrawal before ejaculation. In the previous 12 months, 71% of participants reported having UAI with a casual partner of different or unknown HIV-status. Of these, 47% reported practicing withdrawal, 38% serosorting, and 25% strategic positioning. In the 319 participants with known HIV-status, serosorting was associated with frequent Internet use to find partners (OR = 2.32), STI (OR = 2.07), and HIV testing in the past 12 months (OR = 1.81). Strategic positioning was associated with HIV-status (OR = 0.13) and having UAI with a partner of different or unknown HIV-status (OR = 3.57). Withdrawal was more frequently practiced by HIV-negative participants or participants reporting high numbers of sexual partners (OR = 2.48) and having UAI with a partner of unknown or different serostatus (OR = 2.08). Risk reduction practices are widely used by MSM, each practice having its own specificities. Further research is needed to determine the contextual factors surrounding harm reduction practices, particularly the strategic or opportunistic nature of their use.

Red meat and cancer risk in a network of case-control studies focusing on cooking practices.

BACKGROUND: Consumption of red meat has been related to increased risk of several cancers. Cooking methods could modify the magnitude of this association, as production of chemicals depends on the temperature and duration of cooking. METHODS: We analyzed data from a network of case-control studies conducted in Italy and Switzerland between 1991 and 2009. The studies included 1465 oral and pharyngeal, 198 nasopharyngeal, 851 laryngeal, 505 esophageal, 230 stomach, 1463 colon, 927 rectal, 326 pancreatic, 3034 breast, 454 endometrial, 1031 ovarian, 1294 prostate and 767 renal cancer cases. Controls included 11 656 patients admitted for acute, non-neoplastic conditions. Odds ratios (ORs) and confidence intervals (CIs) were estimated by multiple logistic regression models, adjusted for known confounding factors. RESULTS: Daily intake of red meat was significantly associated with the risk of cancer of the oral cavity and pharynx (OR for increase of 50 g/day = 1.38; 95% CI: 1.26-1.52), nasopharynx (OR = 1.29; 95% CI: 1.04-1.60), larynx (OR = 1.46; 95% CI: 1.30-1.64), esophagus (OR = 1.46; 95% CI: 1.23-1.72), colon (OR = 1.17; 95% CI: 1.08-1.26), rectum (OR = 1.22; 95% CI:1.11-1.33), pancreas (OR = 1.51; 95% CI: 1.25-1.82), breast (OR = 1.12; 95% CI: 1.04-1.19), endometrium (OR = 1.30; 95% CI: 1.10-1.55) and ovary (OR = 1.29; 95% CI: 1.16-1.43). Fried meat was associated with a higher risk of cancer of oral cavity and pharynx (OR = 2.80; 95% CI: 2.02-3.89) and esophagus (OR = 4.52; 95% CI: 2.50-8.18). Risk of prostate cancer increased for meat cooked by roasting/grilling (OR = 1.31; 95% CI: 1.12-1.54). No heterogeneity according to cooking methods emerged for other cancers. Nonetheless, significant associations with boiled/stewed meat also emerged for cancer of the nasopharynx (OR = 1.97; 95% CI: 1.30-3.00) and stomach (OR = 1.86; 95% CI: 1.20-2.87). CONCLUSIONS: Our analysis confirmed red meat consumption as a risk factor for several cancer sites, with a limited impact of cooking methods. These findings, thus, call for a limitation of its consumption in populations of Western countries.

Patients with AIDS-defining cancers are not universally screened for HIV: a 10-year retrospective analysis of HIV-testing practices in a Swiss university hospital.

OBJECTIVES: Kaposi's sarcoma (KS), invasive cervical carcinoma (ICC) and non-Hodgkin lymphoma (NHL) have been listed as AIDS-defining cancers (ADCs) by the Centers for Disease Control and Prevention since 1993. Despite this, HIV screening is not universally mentioned in ADC treatment guidelines. We examined screening practices at a tertiary centre serving a population where HIV seroprevalence is 0.4%. METHODS: Patients with KS, ICC, NHL and Hodgkin lymphoma (HL), treated at Lausanne University Hospital between January 2002 and July 2012, were studied retrospectively. HIV testing was considered part of the oncology work-up if performed between 90 days before and 90 days after the cancer diagnosis date. RESULTS: A total of 880 patients were examined: 10 with KS, 58 with ICC, 672 with NHL and 140 with HL. HIV testing rates were 100, 11, 60 and 59%, and HIV seroprevalence was 60, 1.7, 3.4 and 5%, respectively. Thirty-seven patients (4.2%) were HIV-positive, of whom eight (22%) were diagnosed at oncology work-up. All newly diagnosed patients had CD4 counts < 200 cells/μL and six (75%) had presented to a physician 12-236 weeks previously with conditions warranting HIV testing. CONCLUSIONS: In our institution, only patients with KS were universally screened. Screening rates for other cancers ranged from 11 to 60%. HIV seroprevalence was at least fourfold higher than the population average. As HIV-positive status impacts on cancer patient medical management, HIV screening should be included in oncology guidelines. Further, we recommend that opt-out screening should be adopted in all patients with ADCs and HL.

Dealing with clients' diversity in test situations: Client categorisations in psychologists' accounts of their practices

Reducing a test administration to standardised procedures reflects the test designers' standpoint. However, from the practitioners' standpoint, each client is unique. How do psychologists deal with both standardised test administration and clients' diversity? To answer this question, we interviewed 17 psychologists working in three public services for children and adolescents about their assessment practices. We analysed the numerous "client categorisations" they produced in their accounts. We found that they had shared perceptions about their clients' diversity, and reported various non-standard practices that complemented standardised test administration, but also differed from them or were even forbidden. They seem to experience a dilemma between: (a) prescribed and situated practices; (b) scientific and situated reliability; (c) commutative and distributive justice. For practitioners, dealing with clients' diversity this is a practical problem, halfway between a problem-solving task and a moral dilemma.

Daily smoking as a marker of weight control practices among female adolescents

Purpose: There is evidence indicating that adolescent females smoke as a way to control weight. The aim of our research is to assess whether daily smoking is a marker for weight control practices among adolescent females. Methods: Data were drawn from the 2002 Swiss Multicenter Adolescent Survey on Health (SMASH02) data base, a survey including 7,548 [3,838 females] in-school adolescents aged 16-20 years in Switzerland. Among females self-reporting BMI (N _ 3,761), two groups were drawn: daily smokers (DS, N _ 1,273) included all those smoking at least 1 cigarette/day and never smokers (NS, N _ 1,888) included all those having never smoked. Former (N _ 177) and occasional (N _ 423) smokers were not included. Groups were compared on weight control practices (being on a diet, self-induced vomiting, use of doctor-prescribed or over-the-counter appetite suppressors) controlling for possible confounding variables (age, BMI, feeling fat, body image, use of other substances, depression, sport practice, academic track and perceived advanced puberty). Analyses were performed with STATA 9. Bivariate analyses are presented as point-prevalence and multivariate analysis (using logistic regression) are presented as adjusted odds ratio (AOR) and [95% confidence interval]. Results: In the bivariate analysis, DS females were significantly more likely (p _ 0.001) than NS to be on a diet (DS: 33.2%, NS: 22.2%), to self-induce vomiting (DS: 9.0%, NS: 3.3%), and to use doctor prescribed (DS: 2.3%, NS: 0.9%) or over-the-counter (DS: 3.2%, NS: 1.2%) appetite suppressors. In the multivariate analysis, DS females were more likely than NS to be on a diet (AOR: 1.40 [1.17/1.68]), to self-induce vomiting (AOR: 2.07 [1.45/2.97]), and to use doctor-prescribed appetite suppressors (AOR: 1.99 [1.00/ 3.96]). Conclusions: Weight control practices are more frequent among female daily smokers than among never smokers. This finding seems to confirm cigarette smoking as a way to control weight among adolescent females. Health professionals should inquire adolescent female smokers about weight control practices, and this association must be kept in mind when discussing tobacco cessation options with adolescent females. Sources of Support: The SMASH02 survey was funded by the Swiss Federal Office of Public Health and the participating cantons.