Managing the crises : how did local governments react to the financial crisis in 2008 and what explains the differences ? The case of Swiss municipalities

Swiss municipalities are, to a large extent, responsible for their financial resources. Since these resources primarily depend on income and property taxes from individuals and enterprises, municipality budgets are likely to be directly affected by the current crisis in the financial sector and the economy. This article investigates how municipalities perceived this threat and how they reacted to it. In a nationwide survey conducted at the end of 2009 in all 2596 Swiss municipalities, we asked local secretaries which measures had been launched in order to cope with expected losses in tax income and a possible increase in welfare spending. Did the municipalities rely on Keynesian measures increasing public spending and accepting greater deficits, or did they try to avoid further deficits by using austerity measures and a withdrawal of planned investments? Our results show that only a few municipalities - mainly the bigger ones - expected to be greatly affected by the crisis. Their reactions, however, did not reveal any clear patterns that theory would lead one to expect. Preferences for austerity measures and deficit spending become visible but many municipalities took measures from both theories. The strongest explanatory factors for determining how/why municipalities react are: the municipality's level of affectedness followed by whether or not the municipality belongs to the French-speaking part of the country. Size also has an impact, whereas the strength of the Social Democrat party is negligible. Explaining what kind of measures municipalities are likely to take is more difficult. However, the more a municipality is affected, the more likely it is to stick to austerity measures.

Screening primary-care patients forgoing health care for economic reasons.

BACKGROUND: Growing social inequities have made it important for general practitioners to verify if patients can afford treatment and procedures. Incorporating social conditions into clinical decision-making allows general practitioners to address mismatches between patients' health-care needs and financial resources. OBJECTIVES: Identify a screening question to, indirectly, rule out patients' social risk of forgoing health care for economic reasons, and estimate prevalence of forgoing health care and the influence of physicians' attitudes toward deprivation. DESIGN: Multicenter cross-sectional survey. PARTICIPANTS: Forty-seven general practitioners working in the French-speaking part of Switzerland enrolled a random sample of patients attending their private practices. MAIN MEASURES: Patients who had forgone health care were defined as those reporting a household member (including themselves) having forgone treatment for economic reasons during the previous 12 months, through a self-administered questionnaire. Patients were also asked about education and income levels, self-perceived social position, and deprivation levels. KEY RESULTS: Overall, 2,026 patients were included in the analysis; 10.7% (CI95% 9.4-12.1) reported a member of their household to have forgone health care during the 12 previous months. The question "Did you have difficulties paying your household bills during the last 12 months" performed better in identifying patients at risk of forgoing health care than a combination of four objective measures of socio-economic status (gender, age, education level, and income) (R(2) = 0.184 vs. 0.083). This question effectively ruled out that patients had forgone health care, with a negative predictive value of 96%. Furthermore, for physicians who felt powerless in the face of deprivation, we observed an increase in the odds of patients forgoing health care of 1.5 times. CONCLUSION: General practitioners should systematically evaluate the socio-economic status of their patients. Asking patients whether they experience any difficulties in paying their bills is an effective means of identifying patients who might forgo health care.

A Survey of Active Learning Algorithms for Supervised Remote Sensing Image Classification

Defining an efficient training set is one of the most delicate phases for the success of remote sensing image classification routines. The complexity of the problem, the limited temporal and financial resources, as well as the high intraclass variance can make an algorithm fail if it is trained with a suboptimal dataset. Active learning aims at building efficient training sets by iteratively improving the model performance through sampling. A user-defined heuristic ranks the unlabeled pixels according to a function of the uncertainty of their class membership and then the user is asked to provide labels for the most uncertain pixels. This paper reviews and tests the main families of active learning algorithms: committee, large margin, and posterior probability-based. For each of them, the most recent advances in the remote sensing community are discussed and some heuristics are detailed and tested. Several challenging remote sensing scenarios are considered, including very high spatial resolution and hyperspectral image classification. Finally, guidelines for choosing the good architecture are provided for new and/or unexperienced user.

Task force IV: Clinical use of ambulatory blood pressure monitoring. Participants of the 1999 Consensus Conference on Ambulatory Blood Pressure Monitoring

OBJECTIVE: To reach a consensus on the clinical use of ambulatory blood pressure monitoring (ABPM). METHODS: A task force on the clinical use of ABPM wrote this overview in preparation for the Seventh International Consensus Conference (23-25 September 1999, Leuven, Belgium). This article was amended to account for opinions aired at the conference and to reflect the common ground reached in the discussions. POINTS OF CONSENSUS: The Riva Rocci/Korotkoff technique, although it is prone to error, is easy and cheap to perform and remains worldwide the standard procedure for measuring blood pressure. ABPM should be performed only with properly validated devices as an accessory to conventional measurement of blood pressure. Ambulatory recording of blood pressure requires considerable investment in equipment and training and its use for screening purposes cannot be recommended. ABPM is most useful for identifying patients with white-coat hypertension (WCH), also known as isolated clinic hypertension, which is arbitrarily defined as a clinic blood pressure of more than 140 mmHg systolic or 90 mmHg diastolic in a patient with daytime ambulatory blood pressure below 135 mmHg systolic and 85 mmHg diastolic. Some experts consider a daytime blood pressure below 130 mmHg systolic and 80 mmHg diastolic optimal. Whether WCH predisposes subjects to sustained hypertension remains debated. However, outcome is better correlated to the ambulatory blood pressure than it is to the conventional blood pressure. Antihypertensive drugs lower the clinic blood pressure in patients with WCH but not the ambulatory blood pressure, and also do not improve prognosis. Nevertheless, WCH should not be left unattended. If no previous cardiovascular complications are present, treatment could be limited to follow-up and hygienic measures, which should also account for risk factors other than hypertension. ABPM is superior to conventional measurement of blood pressure not only for selecting patients for antihypertensive drug treatment but also for assessing the effects both of non-pharmacological and of pharmacological therapy. The ambulatory blood pressure should be reduced by treatment to below the thresholds applied for diagnosing sustained hypertension. ABPM makes the diagnosis and treatment of nocturnal hypertension possible and is especially indicated for patients with borderline hypertension, the elderly, pregnant women, patients with treatment-resistant hypertension and patients with symptoms suggestive of hypotension. In centres with sufficient financial resources, ABPM could become part of the routine assessment of patients with clinic hypertension. For patients with WCH, it should be repeated at annual or 6-monthly intervals. Variation of blood pressure throughout the day can be monitored only by ABPM, but several advantages of the latter technique can also be obtained by self-measurement of blood pressure, a less expensive method that is probably better suited to primary practice and use in developing countries. CONCLUSIONS: ABPM or equivalent methods for tracing the white-coat effect should become part of the routine diagnostic and therapeutic procedures applied to treated and untreated patients with elevated clinic blood pressures. Results of long-term outcome trials should better establish the advantage of further integrating ABPM as an accessory to conventional sphygmomanometry into the routine care of hypertensive patients and should provide more definite information on the long-term cost-effectiveness. Because such trials are not likely to be funded by the pharmaceutical industry, governments and health insurance companies should take responsibility in this regard.

Primary care at Swiss universities--current state and perspective.

BACKGROUND: There is increasing evidence that a strong primary care is a cornerstone of an efficient health care system. But Switzerland is facing a shortage of primary care physicians (PCPs). This pushed the Federal Council of Switzerland to introduce a multifaceted political programme to strengthen the position of primary care, including its academic role. The aim of this paper is to provide a comprehensive overview of the situation of academic primary care at the five Swiss universities by the end of year 2012. RESULTS: Although primary care teaching activities have a long tradition at the five Swiss universities with activities starting in the beginning of the 1980ies; the academic institutes of primary care were only established in recent years (2005 - 2009). Only one of them has an established chair. Human and financial resources vary substantially. At all universities a broad variety of courses and lectures are offered, including teaching in private primary care practices with 1331 PCPs involved. Regarding research, differences among the institutes are tremendous, mainly caused by entirely different human resources and skills. CONCLUSION: So far, the activities of the existing institutes at the Swiss Universities are mainly focused on teaching. However, for a complete academic institutionalization as well as an increased acceptance and attractiveness, more research activities are needed. In addition to an adequate basic funding of research positions, competitive research grants have to be created to establish a specialty-specific research culture.

Diabétologie [Diabetes].

The new recommendations on the pharmacological treatment of type 2 diabetes have introduced two important changes. The first is to have common strategies between European and American diabetes societies. The second, which is certainly the most significant, is to develop a patient centred approach suggesting therapies that take into account the patient's preferences and use of decision support tools. The individual approach integrates six factors: the capacity and motivation of the patient to manage his illness and its treatment, the risks of hypoglycemia, the life expectancy, the presence of co-morbidities and vascular complications, as well as the financial resources of the patient and the healthcare system. Treatment guidelines for cardiovascular risk reduction in diabetic remains the last point to develop.

Country actions to meet UN commitments on non-communicable diseases: a stepwise approach.

Strong leadership from heads of state is needed to meet national commitments to the UN political declaration on non-communicable diseases (NCDs) and to achieve the goal of a 25% reduction in premature NCD mortality by 2025 (the 25 by 25 goal). A simple, phased, national response to the political declaration is suggested, with three key steps: planning, implementation, and accountability. Planning entails mobilisation of a multisectoral response to develop and support the national action plan, and to build human, financial, and regulatory capacity for change. Implementation of a few priority and feasible cost-effective interventions for the prevention and treatment of NCDs will achieve the 25 by 25 goal and will need only few additional financial resources. Accountability incorporates three dimensions: monitoring of progress, reviewing of progress, and appropriate responses to accelerate progress. A national NCD commission or equivalent, which is independent of government, is needed to ensure that all relevant stakeholders are held accountable for the UN commitments to NCDs.

Frequent users of the emergency department in a universal health coverage system : a randomized controlled trial of a case-management intervention

BACKGROUND: Frequent emergency department users represent a small number of patients but account for a large number of emergency department visits. They should be a focus because they are often vulnerable patients with many risk factors affecting their quality of life (QoL). Case management interventions have resulted in a significant decrease in emergency department visits, but association with QoL has not been assessed. One aim of our study was to examine to what extent an interdisciplinary case management intervention, compared to standard emergency care, improved frequent emergency department users' QoL. METHODS: Data are part of a randomized, controlled trial designed to improve frequent emergency department users' QoL and use of health-care resources at the Lausanne University Hospital, Switzerland. In total, 250 frequent emergency department users (≥5 attendances during the previous 12 months; ≥ 18 years of age) were interviewed between May 2012 and July 2013. Following an assessment focused on social characteristics; social, mental, and somatic determinants of health; risk behaviors; health care use; and QoL, participants were randomly assigned to the control or the intervention group (n=125 in each group). The final sample included 194 participants (20 deaths, 36 dropouts, n=96 in the intervention group, n=99 in the control group). Participants in the intervention group received a case management intervention by an interdisciplinary, mobile team in addition to standard emergency care. The case management intervention involved four nurses and a physician who provided counseling and assistance concerning social determinants of health, substance-use disorders, and access to the health-care system. The participants' QoL was evaluated by a study nurse using the WHOQOL-BREF five times during the study (at baseline, and at 2, 5.5, 9, and 12 months). Four of the six WHOQOL dimensions of QoL were retained here: physical health, psychological health, social relationship, and environment, with scores ranging from 0 (low QoL) to 100 (high QoL). A linear, mixed-effects model with participants as a random effect was run to analyze the change in QoL over time. The effects of time, participants' group, and the interaction between time and group were tested. These effects were controlled for sociodemographic characteristics and health-related variables (i.e., age, gender, education, citizenship, marital status, type of financial resources, proficiency in French, somatic and mental health problems, and behaviors at risk).

Optimizing the Anti-VEGF Treatment Strategy for Neovascular Age-Related Macular Degeneration: From Clinical Trials to Real-Life Requirements.

NlmCategory="UNASSIGNED">This Perspective discusses the pertinence of variable dosing regimens with anti-vascular endothelial growth factor (VEGF) for neovascular age-related macular degeneration (nAMD) with regard to real-life requirements. After the initial pivotal trials of anti-VEGF therapy, the variable dosing regimens pro re nata (PRN), Treat-and-Extend, and Observe-and-Plan, a recently introduced regimen, aimed to optimize the anti-VEGF treatment strategy for nAMD. The PRN regimen showed good visual results but requires monthly monitoring visits and can therefore be difficult to implement. Moreover, application of the PRN regimen revealed inferior results in real-life circumstances due to problems with resource allocation. The Treat-and-Extend regimen uses an interval based approach and has become widely accepted for its ease of preplanning and the reduced number of office visits required. The parallel development of the Observe-and-Plan regimen demonstrated that the future need for retreatment (interval) could be reliably predicted. Studies investigating the observe-and-plan regimen also showed that this could be used in individualized fixed treatment plans, allowing for dramatically reduced clinical burden and good outcomes, thus meeting the real life requirements. This progressive development of variable dosing regimens is a response to the real-life circumstances of limited human, technical, and financial resources. This includes an individualized treatment approach, optimization of the number of retreatments, a minimal number of monitoring visits, and ease of planning ahead. The Observe-and-Plan regimen achieves this goal with good functional results. Translational Relevance: This perspective reviews the process from the pivotal clinical trials to the development of treatment regimens which are adjusted to real life requirements. The article discusses this translational process which- although not the classical interpretation of translation from fundamental to clinical research, but a subsequent process after the pivotal clinical trials - represents an important translational step from the clinical proof of efficacy to optimization in terms of patients' and clinics' needs. The related scientific procedure includes the exploration of the concept, evaluation of security, and finally proof of efficacy.

Emerging bacterial pathogens: the past and beyond.

Since the 1950s, medical communities have been facing with emerging and reemerging infectious diseases, and emerging pathogens are now considered to be a major microbiologic public health threat. In this review, we focus on bacterial emerging diseases and explore factors involved in their emergence as well as future challenges. We identified 26 major emerging and reemerging infectious diseases of bacterial origin; most of them originated either from an animal and are considered to be zoonoses or from water sources. Major contributing factors in the emergence of these bacterial infections are: (1) development of new diagnostic tools, such as improvements in culture methods, development of molecular techniques and implementation of mass spectrometry in microbiology; (2) increase in human exposure to bacterial pathogens as a result of sociodemographic and environmental changes; and (3) emergence of more virulent bacterial strains and opportunistic infections, especially affecting immunocompromised populations. A precise definition of their implications in human disease is challenging and requires the comprehensive integration of microbiological, clinical and epidemiologic aspects as well as the use of experimental models. It is now urgent to allocate financial resources to gather international data to provide a better understanding of the clinical relevance of these waterborne and zoonotic emerging diseases.

Do resources, justice administration practices and federalism have an impact on registered and sentenced crime prevalence ?

This contribution, based on a statistical approach, undertakes to link data on resources (personnel and financial means) and the working of the administration of penal justice (prosecution, sentencing) taking into account the nationality of those prosecuted. In order to be able to distinguish prosecution and sentencing practices of judicial authorities and possible processes of discrimination, diverse sources have been used such as data from court administrations, public finances and police forces, collected by the Swiss Federal Statistical Office and the Swiss Federal administration of finances. The authors discuss discrimination in prosecution and sentencing between Swiss residents and foreigners taking into account localization and resources regarding personnel and public finances.

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.

Three essays in risk management in financial institutions

The choice to adopt risk-sensitive measurement approaches for operational risks: the case of Advanced Measurement Approach under Basel II New Capital Accord This paper investigates the choice of the operational risk approach under Basel II requirements and whether the adoption of advanced risk measurement approaches allows banks to save capital. Among the three possible approaches for operational risk measurement, the Advanced Measurement Approach (AMA) is the most sophisticated and requires the use of historical loss data, the application of statistical tools, and the engagement of a highly qualified staff. Our results provide evidence that the adoption of AMA is contingent on the availability of bank resources and prior experience in risk-sensitive operational risk measurement practices. Moreover, banks that choose AMA exhibit low requirements for capital and, as a result might gain a competitive advantage compared to banks that opt for less sophisticated approaches. - Internal Risk Controls and their Impact on Bank Solvency Recent cases in financial sector showed the importance of risk management controls on risk taking and firm performance. Despite advances in the design and implementation of risk management mechanisms, there is little research on their impact on behavior and performance of firms. Based on data from a sample of 88 banks covering the period between 2004 and 2010, we provide evidence that internal risk controls impact the solvency of banks. In addition, our results show that the level of internal risk controls leads to a higher degree of solvency in banks with a major shareholder in contrast to widely-held banks. However, the relationship between internal risk controls and bank solvency is negatively affected by BHC growth strategies and external restrictions on bank activities, while the higher regulatory requirements for bank capital moderates positively this relationship. - The Impact of the Sophistication of Risk Measurement Approaches under Basel II on Bank Holding Companies Value Previous research showed the importance of external regulation on banks' behavior. Some inefficient standards may accentuate risk-taking in banks and provoke a financial crisis. Despite the growing literature on the potential effects of Basel II rules, there is little empirical research on the efficiency of risk-sensitive capital measurement approaches and their impact on bank profitability and market valuation. Based on data from a sample of 66 banks covering the period between 2008 and 2010, we provide evidence that prudential ratios computed under Basel II standards predict the value of banks. However, this relation is contingent on the degree of sophistication of risk measurement approaches that banks apply. Capital ratios are effective in predicting bank market valuation when banks adopt the advanced approaches to compute the value of their risk-weighted assets.

Asset freezing, corporate political resources and the Tullock paradox

In 1967, Gordon Tullock asked why firms do not spend more on campaign contributions, despite the large rents that could be generated from political activities. We suggest in this paper that part of the puzzle could come from the fact that one important type of political activity has been neglected by the literature which focuses on campaign contributions or political connections. We call this neglected activity "asset freezing": situations in which firms delay lay-offs or invest in specific technologies to support local politicians' re-election objectives. In doing so, firms bear a potentially significant cost as they do not use a portion of their economic assets in the most efficient or productive way. The purpose of this paper is to provide a first theoretical exploration of this phenomenon. Building on the literature on corporate political resources, we argue that a firm's economic assets can be evaluated based on their degree of "political freezability," which depends on the flexibility of their use and on their value for policy-makers. We then develop a simple model in which financial contributions and freezing assets are alternative options for a firm willing to lawfully influence public policy-making, and derive some of our initial hypotheses more formally.

Financial integration, capital misallocation and global imbalances

This paper shows that in a stylized model with two countries, characterized by different levels of financial development, the following facts can be replicated: 1) persistent current account surpluses and 2) high TFP growth in China. Under autarky, entrepreneurs in the emerging country overinvest in short-term projects and underinvest in long-term projects because short-term assets help them secure long-term investments in the presence of credit constraints. This creates an aggregate misallocation of capital. When financial markets integrate, entrepreneurs with long-term projects can have access to cheaper short-term assets abroad, which leaves them more resources to invest in their projects. This both reduces capital misallocations and generates capital outflows.