How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria

We study the response of regional employment and nominal wages to trade liberalization, exploiting the natural experiment provided by the opening of Central and Eastern European markets after the fall of the Iron Curtain in 1990. Using data for Austrian municipalities, we examine differential pre- and post-1990 wage and employment growth rates between regions bordering the formerly communist economies and interior regions. If the "border regions" are defined narrowly, within a band of less than 50 kilometers, we can identify statistically significant liberalization effects on both employment and wages. While wages responded earlier than employment, the employment effect over the entire adjustment period is estimated to be around three times as large as the wage effect. The implied slope of the regional labor supply curve can be replicated in an economic geography model that features obstacles to labor migration due to immobile housing and to heterogeneous locational preferences.

How Wages and Employment Adjust to Trade Liberalization: Quasi-Experimental Evidence from Austria

We study the response of regional employment and nominal wages to trade liberalization, exploiting the natural experiment provided by the opening of Central and Eastern European markets after the fall of the Iron Curtain in 1990. Using data for Austrian municipalities, we examine di¤erential pre- and post-1990 wage and employment growth rates between regions bordering the formerly communist economies and interior regions. If the 'border regions'are de...ned narrowly, within a band of less than 50 kilometers, we can identify statistically signi...cant liberalization e¤ects on both employment and wages. While wages responded earlier than employment, the employment e¤ect over the entire adjustment period is estimated to be around three times as large as the wage e¤ect. The implied slope of the regional labor supply curve can be replicated in an economic geography model that features obstacles to labor migration due to immobile housing and to heterogeneous locational preferences.

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.

The rewards of cooperation: The effects of membership in European regulatory networks

Networks famously epitomize the shift from 'government' to 'governance' as governing structures for exercising control and coordination besides hierarchies and markets. Their distinctive features are their horizontality, the interdependence among member actors and an interactive decision-making style. Networks are expected to increase the problem-solving capacity of political systems in a context of growing social complexity, where political authority is increasingly fragmented across territorial and functional levels. However, very little attention has been given so far to another crucial implication of network governance - that is, the effects of networks on their members. To explore this important question, this article examines the effects of membership in European regulatory networks on two crucial attributes of member agencies, which are in charge of regulating finance, energy, telecommunications and competition: organisational growth and their regulatory powers. Panel analysis applied to data on 118 agencies during a ten-year period and semi-structured interviews provide mixed support regarding the expectation of organisational growth while strongly confirming the positive effect of networks on the increase of the regulatory powers attributed to member agencies.

Anti-doping testing at the 2008 European football championship.

Big sports events like the 2008 European Football Championship are a challenge for anti-doping activities, particularly when the sports event is hosted by two different countries and there are two laboratories accredited by the World Anti-Doping Agency. This challenges the logistics of sample collection as well as the chemical analyses, which must be carried out timeously. The following paper discusses the handling of whereabouts information for each athlete and the therapeutic use exemption system, experiences in sample collection and transportation of blood and urine samples, and the results of the chemical analysis in two different accredited laboratories. An overview of the analytical results of blood profiling and growth hormone testing in comparison with the distribution of the normal population is also presented.

Three essays on the psychology of investment and financial markets

Préface My thesis consists of three essays where I consider equilibrium asset prices and investment strategies when the market is likely to experience crashes and possibly sharp windfalls. Although each part is written as an independent and self contained article, the papers share a common behavioral approach in representing investors preferences regarding to extremal returns. Investors utility is defined over their relative performance rather than over their final wealth position, a method first proposed by Markowitz (1952b) and by Kahneman and Tversky (1979), that I extend to incorporate preferences over extremal outcomes. With the failure of the traditional expected utility models in reproducing the observed stylized features of financial markets, the Prospect theory of Kahneman and Tversky (1979) offered the first significant alternative to the expected utility paradigm by considering that people focus on gains and losses rather than on final positions. Under this setting, Barberis, Huang, and Santos (2000) and McQueen and Vorkink (2004) were able to build a representative agent optimization model which solution reproduced some of the observed risk premium and excess volatility. The research in behavioral finance is relatively new and its potential still to explore. The three essays composing my thesis propose to use and extend this setting to study investors behavior and investment strategies in a market where crashes and sharp windfalls are likely to occur. In the first paper, the preferences of a representative agent, relative to time varying positive and negative extremal thresholds are modelled and estimated. A new utility function that conciliates between expected utility maximization and tail-related performance measures is proposed. The model estimation shows that the representative agent preferences reveals a significant level of crash aversion and lottery-pursuit. Assuming a single risky asset economy the proposed specification is able to reproduce some of the distributional features exhibited by financial return series. The second part proposes and illustrates a preference-based asset allocation model taking into account investors crash aversion. Using the skewed t distribution, optimal allocations are characterized as a resulting tradeoff between the distribution four moments. The specification highlights the preference for odd moments and the aversion for even moments. Qualitatively, optimal portfolios are analyzed in terms of firm characteristics and in a setting that reflects real-time asset allocation, a systematic over-performance is obtained compared to the aggregate stock market. Finally, in my third article, dynamic option-based investment strategies are derived and illustrated for investors presenting downside loss aversion. The problem is solved in closed form when the stock market exhibits stochastic volatility and jumps. The specification of downside loss averse utility functions allows corresponding terminal wealth profiles to be expressed as options on the stochastic discount factor contingent on the loss aversion level. Therefore dynamic strategies reduce to the replicating portfolio using exchange traded and well selected options, and the risky stock.

Superior outcome of women with stage I/II cutaneous melanoma: pooled analysis of four European Organisation for Research and Treatment of Cancer phase III trials.

PURPOSE: Several studies observed a female advantage in the prognosis of cutaneous melanoma, for which behavioral factors or an underlying biologic mechanism might be responsible. Using complete and reliable follow-up data from four phase III trials of the European Organisation for Research and Treatment of Cancer (EORTC) Melanoma Group, we explored the female advantage across multiple end points and in relation to other important prognostic indicators. PATIENTS AND METHODS: Patients diagnosed with localized melanoma were included in EORTC adjuvant treatment trials 18832, 18871, 18952, and 18961 and randomly assigned during the period of 1984 to 2005. Cox proportional hazard models were used to calculate hazard ratios (HRs) and 95% CIs for women compared with men, adjusted for age, Breslow thickness, body site, ulceration, performed lymph node dissection, and treatment. RESULTS: A total of 2,672 patients with stage I/II melanoma were included. Women had a highly consistent and independent advantage in overall survival (adjusted HR, 0.70; 95% CI, 0.59 to 0.83), disease-specific survival (adjusted HR, 0.74; 95% CI, 0.62 to 0.88), time to lymph node metastasis (adjusted HR, 0.70; 95% CI, 0.51 to 0.96), and time to distant metastasis (adjusted HR, 0.69; 95% CI, 0.59 to 0.81). Subgroup analysis showed that the female advantage was consistent across all prognostic subgroups (with the possible exception of head and neck melanomas) and in pre- and postmenopausal age groups. CONCLUSION: Women have a consistent and independent relative advantage in all aspects of the progression of localized melanoma of approximately 30%, most likely caused by an underlying biologic sex difference.

The use of mannan antigen and anti-mannan antibodies in the diagnosis of invasive candidiasis: recommendations from the Third European Conference on Infections in Leukemia.

INTRODUCTION: Timely diagnosis of invasive candidiasis (IC) remains difficult as the clinical presentation is not specific and blood cultures lack sensitivity and need a long incubation time. Thus, non-culture-based methods for diagnosing IC have been developed. Mannan antigen (Mn) and anti-mannan antibodies (A-Mn) are present in patients with IC. On behalf of the Third European Conference on Infections in Leukemia, the performance of these tests was analysed and reviewed. METHODS: The literature was searched for studies using the commercially available sandwich enzyme-linked immunosorbent assays (Platelia™, Bio-Rad Laboratories, Marnes-la-Coquette, France) for detecting Mn and A-Mn in serum. The target condition of this review was IC defined according to 2008 European Organization for Research and Treatment of Cancer/Mycoses Study Group criteria. Sensitivity, specificity and diagnostic odds ratios (DOR) were calculated for Mn, A-Mn and combined Mn/A-Mn testing. RESULTS: Overall, 14 studies that comprised 453 patients and 767 controls were reviewed. The patient populations included in the studies were mainly haematological and cancer cases in seven studies and mainly intensive care unit and surgery cases in the other seven studies. All studies but one were retrospective in design. Mn sensitivity was 58% (95% confidence interval [CI], 53-62); specificity, 93% (95% CI, 91-94) and DOR, 18 (95% CI 12-28). A-Mn sensitivity was 59% (95% CI, 54-65); specificity, 83% (95% CI, 79-97) and DOR, 12 (95% CI 7-21). Combined Mn/A-Mn sensitivity was 83% (95% CI, 79-87); specificity, 86% (95% CI, 82-90) and DOR, 58 (95% CI 27-122). Significant heterogeneity of the studies was detected. The sensitivity of both Mn and A-Mn varied for different Candida species, and it was the highest for C. albicans, followed by C. glabrata and C. tropicalis. In 73% of 45 patients with candidemia, at least one of the serological tests was positive before the culture results, with mean time advantage being 6 days for Mn and 7 days for A-Mn. In 21 patients with hepatosplenic IC, 18 (86%) had Mn or A-Mn positive test results at a median of 16 days before radiological detection of liver or spleen lesions. CONCLUSIONS: Mn and A-Mn are useful for diagnosis of IC. The performance of combined Mn/A-Mn testing is superior to either Mn or A-Mn testing.

ESCMID* guideline for the diagnosis and management of Candida diseases 2012: developing European guidelines in clinical microbiology and infectious diseases.

The process to develop a guideline in a European setting remains a challenge. The ESCMID Fungal Infection Study Group (EFISG) successfully achieved this endeavour. After two face-to-face meetings, numerous telephone conferences, and email correspondence, an ESCMID task force (basically composed of members of the Society's Fungal Infection Study Group, EFISG) finalized the ESCMID diagnostic and management/therapeutic guideline for Candida diseases. By appreciating various patient populations at risk for Candida diseases, four subgroups were predefined, mainly ICU patients, paediatric, HIV/AIDS and patients with malignancies including haematopoietic stem cell transplantation. Besides treatment recommendations, the ESCMID guidelines provide guidance for diagnostic procedures. For the guidelines, questions were formulated to phrase the intention of a given recommendation, for example, outcome. The recommendation was the clinical intervention, which was graded by a score of A-D for the 'Strength of a recommendation'. The 'level of evidence' received a score of I-III. The author panel was approved by ESCMID, European Organisation for Research and Treatment of Cancer, European Group for Blood and Marrow Transplantation, European Society of Intensive Care Medicine and the European Confederation of Medical Mycology. The guidelines followed the framework of GRADE and Appraisal of Guidelines, Research, and Evaluation. The drafted guideline was presented at ECCMID 2011 and points of discussion occurring during that meeting were incorporated into the manuscripts. These ESCMID guidelines for the diagnosis and management of Candida diseases provide guidance for clinicians in their daily decision-making process.

Diagnostic yield of short-term video-EEG monitoring for epilepsy and PNESs: a European assessment.

INTRODUCTION: Although long-term video-EEG monitoring (LVEM) is routinely used to investigate paroxysmal events, short-term video-EEG monitoring (SVEM) lasting <24 h is increasingly recognized as a cost-effective tool. Since, however, relatively few studies addressed the yield of SVEM among different diagnostic groups, we undertook the present study to investigate this aspect. METHODS: We retrospectively analyzed 226 consecutive SVEM recordings over 6 years. All patients were referred because routine EEGs were inconclusive. Patients were classified into 3 suspected diagnostic groups: (1) group with epileptic seizures, (2) group with psychogenic nonepileptic seizures (PNESs), and (3) group with other or undetermined diagnoses. We assessed recording lengths, interictal epileptiform discharges, epileptic seizures, PNESs, and the definitive diagnoses obtained after SVEM. RESULTS: The mean age was 34 (±18.7) years, and the median recording length was 18.6 h. Among the 226 patients, 127 referred for suspected epilepsy - 73 had a diagnosis of epilepsy, none had a diagnosis of PNESs, and 54 had other or undetermined diagnoses post-SVEM. Of the 24 patients with pre-SVEM suspected PNESs, 1 had epilepsy, 12 had PNESs, and 11 had other or undetermined diagnoses. Of the 75 patients with other diagnoses pre-SVEM, 17 had epilepsy, 11 had PNESs, and 47 had other or undetermined diagnoses. After SVEM, 15 patients had definite diagnoses other than epilepsy or PNESs, while in 96 patients, diagnosis remained unclear. Overall, a definitive diagnosis could be reached in 129/226 (57%) patients. CONCLUSIONS: This study demonstrates that in nearly 3/5 patients without a definitive diagnosis after routine EEG, SVEM allowed us to reach a diagnosis. This procedure should be encouraged in this setting, given its time-effectiveness compared with LVEM.