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

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

The Political Communication of Independent Regulatory Agencies

Since independent regulatory agencies (IRAs) became key actors in European regulatory governance in the 1990s, a significant share of policy-making has been carried out by organizations that are neither democratically elected nor directly accountable to elected politicians. In this context, public communication plays an important role. On the one hand, regulatory agencies might try to use communication to raise their accountability and thereby to mitigate their democratic deficit. On the other hand, communication may be used with the intent to steer the behavior of the regulated industry when more coercive regulatory means are unfeasible or undesirable. However, empirical research focusing directly on how regulators communicate is virtually non-existent. To fill this gap, this paper examines the public communication of IRAs in four countries (the United Kingdom, Germany, Ireland, and Switzerland) and three sectors (financial services, telecommunications, and broadcasting). The empirical analysis, based on qualitative interviews and a quantitative content analysis, indicates that the organization of the communication function follows a national pattern approach while a policy sector approach is helpful for understanding the use of communication as a soft tool of regulation.

The Political Communication of Independent Regulatory Agencies

Since independent regulatory agencies (IRAs) became key actors in European regulatory governance in the 1990s, a significant share of policy-making has been carried out by organizations that are neither democratically elected nor directly accountable to elected politicians. In this context, public communication plays an important role. On the one hand, regulatory agencies might try to use communication to raise their accountability and thereby to mitigate their democratic deficit. On the other hand, communication may be used with the intent to steer the behavior of the regulated industry when more coercive regulatory means are unfeasible or undesirable. However, empirical research focusing directly on how regulators communicate is virtually non-existent. To fill this gap, this paper examines the public communication of IRAs in four countries (the United Kingdom, Germany, Ireland, and Switzerland) and three sectors (financial services, telecommunications, and broadcasting). The empirical analysis, based on qualitative interviews and a quantitative content analysis, indicates that the organization of the communication function follows a national pattern approach while a policy sector approach is helpful for understanding the use of communication as a soft tool of regulation.

La responsabilité des autorités de surveillance bancaire en Europe : étude comparée du droit suisse et des droits allemand, anglais et français dans le contexte de l'Union européenne

I. Introduction : A. Données du problème : En ce début de XXIe siècle, le nombre d'actions en justice visant à engager la responsabilité des autorités de surveillance des banques, à la suite de faillites bancaires, n'a cessé de croître. Ce contentieux s'inscrit dans une tendance générale de recherche des responsabilités des acteurs chargés du contrôle des entités économiques privées. Les autorités de surveillance bancaire ont-elles l'obligation de répondre, devant la justice, du dommage éventuellement causé dans l'exercice de leur mission et d'en assumer les conséquences financières? C'est ce que tentent d'établir les demandeurs, le plus souvent des déposants lésés, qui, malgré l'existence de mécanismes de garantie des dépôts, n'ont pu recouvrer l'intégralité des sommes déposées auprès de banques défaillantes. Les demandeurs agissent fréquemment en dernier ressort contre l'autorité de surveillance bancaire. Les carences alléguées des autorités de surveillance bancaire constituent les fondements de leurs actions en justice. Plusieurs facteurs peuvent expliquer l'augmentation de ce contentieux : ? La croissance des avoirs financiers. Au sein d'un paysage financier européen caractérisé par l'intégration et l'interdépendance de plus en plus poussées des économies nationales, volume et concentration des avoirs financiers n'ont cessé de croître. ? La formalisation des réglementations prudentielles. La surveillance des banques repose désormais sur un corps de règles détaillé et précis, au niveau national, européen et international. ? Les défaillances bancaires. De telles défaillances ont touché de nombreux Etats ces dernières années: la Bank of Credit and Commerce international (BCCI) dont la faillite a eu des répercussions internationales en 1991, l'établissement Barings au Royaume-Uni en 1995, le Crédit Lyonnais en France en 1992 ou la Spar- und Leihkasse Thun en Suisse en 1991. Cette tendance est cependant paradoxale puisque dans de nombreux Etats européens, comme au Royaume-Uni ou en Allemagne, les autorités de surveillance jouissent d'une protection juridique conférée par la loi, les préservant, théoriquement, de poursuites judiciaires intempestives. Dans d'autres pays, comme en France et en Suisse, c'est le droit général de la responsabilité de l'Etat qui est appliqué de manière restrictive par les juridictions compétentes. Les actions judiciaires devant les juges nationaux comportent également des aspects de droit européen. En effet, depuis 1993 un marché bancaire unique existe en Europe et les demandeurs ont fréquemment invoqué le droit matériel de l'Union européenne à l'appui de leurs prétentions. L'affaire BCCI illustre le type de contentieux auquel doivent faire face le Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) allemand, la Financial Services Authority (FSA) britannique, la Commission fédérale des banques (CFB) suisse ou la Commission bancaire (CB) française. L'accroissement de ce contentieux prouve que le risque d'engagement de la responsabilité des autorités de surveillance bancaire n'est pas purement théorique.

Information security and the enforcement of secrecy : the practical application of quantum key distribution

There is no doubt about the necessity of protecting digital communication: Citizens are entrusting their most confidential and sensitive data to digital processing and communication, and so do governments, corporations, and armed forces. Digital communication networks are also an integral component of many critical infrastructures we are seriously depending on in our daily lives. Transportation services, financial services, energy grids, food production and distribution networks are only a few examples of such infrastructures. Protecting digital communication means protecting confidentiality and integrity by encrypting and authenticating its contents. But most digital communication is not secure today. Nevertheless, some of the most ardent problems could be solved with a more stringent use of current cryptographic technologies. Quite surprisingly, a new cryptographic primitive emerges from the ap-plication of quantum mechanics to information and communication theory: Quantum Key Distribution. QKD is difficult to understand, it is complex, technically challenging, and costly-yet it enables two parties to share a secret key for use in any subsequent cryptographic task, with an unprecedented long-term security. It is disputed, whether technically and economically fea-sible applications can be found. Our vision is, that despite technical difficulty and inherent limitations, Quantum Key Distribution has a great potential and fits well with other cryptographic primitives, enabling the development of highly secure new applications and services. In this thesis we take a structured approach to analyze the practical applicability of QKD and display several use cases of different complexity, for which it can be a technology of choice, either because of its unique forward security features, or because of its practicability.

Savoir s'assurer : économie politique internationale des normes de services et mondialisation du marché de la (ré)assurance

The significance of the insurance industry in the functioning of the world economy is often underestimated, with premiums reaching 7.5 % of world gross domestic product (GDP), three times as much as worldwide military expenses. Insurance services mutualise risks in such a way as they provide a form of private governance that complements or makes up for guarantees otherwise supplied by the State. This case study of international standards developed for the insurance market provides evidence that deviates from conventional accounts considering service standards as heavily dependent of national environments and industry specificities. The chapter examines the relationship between tertiarisation, internationalisation and standardisation of contemporary economies by highlighting the complementarity between institutionalist approaches of the French regulation school and international political economy scholarship shedding light on the polarisation in the possible use of standards, notwithstanding thesectoraland institutional specificities of the activities concerned.

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.

Financial protection of patients through compensation of providers: the impact of health equity funds in Cambodia

Public providers have no financial incentive to respect their legal obligation to exempt the poor from user fees. Health Equity Funds (HEFs) aim to make exemptions effective by giving NGOs responsibility for assessing eligibility and compensating providers for lost revenue. We use the geographic spread of HEFs in Cambodia to identify their impact on out-of-pocket (OOP) payments. Among households with some OOP payment, HEFs reduce the amount by 29%, on average. The effect is larger for households that are poorer, mainly use public health care and live closer to a district hospital. HEFs are more effective in reducing OOP payments when they are operated by a NGO, rather than the government, and when they operate in conjunction with the contracting of public health services. HEFs reduce households' health-related debt by around 25%, on average. There is no significant impact on non-medical consumption and health care utilisation

Standards and service offshoring in India: Moving beyond industry and institutional specificities

Résumé Cet article examine le rôle joué par les normes internationales techniques dans la mondialisation des activités de service. Différentes approches d'économie considèrent que les spécificités des activités de services sont un frein à leur délocalisation, à leur industrialisation et à leur normalisation. A l'opposé de ces approches centrées sur les spécificités des activités de services, les approches d'économie politique internationale mettent en avant l'existence de configurations conflictuelles de pouvoir à l'oeuvre dans l'internationalisation des activités de services et ce, au-delà des limites sectorielles et nationales. Cet article examine le cas du secteur des centres d'appels et, plus généralement, celui de la sous-traitance des services aux entreprises (BPO) en Inde. Nos résultats suggèrent que les normes techniques sont importantes dans le secteur étudié, alors même que ces types de services sont conventionnellement identifiés comme étant peu susceptibles d'être soumis à des normes. Une perspective d'économie politique sur la normalisation des activités de service souligne comment la problématique du pouvoir investit la normalisation technique d'une dimension plus progressive à travers les thématiques du "travailleur", du "consommateur", ou de "l'environnement". Abstract This paper explores the role of international standards in the much-debated globalisation of the service economy. Various strands of economic analyses consider that core attributes of services affect their ability to be reliably delocalised, industrialised, and standardised. In contrast, international political economy approaches draw attention to power configurations supporting conflicting use of standards across industries and nations. The paper examines the case of the rising Indian service industry in customer centres and business process outsourcing to probe these opposing views. Our findings suggest that standards matter in types of services that conventional economic analyses identify as unlikely to be standardised, and that the standards used in the Indian BPO industry are widely accepted. Despite little conflict in actual definitions of market requirements, an international political economy perspective on service standardisation highlights the importance of potential power issues related to workers', consumers', and environmental concerns likely to be included in more progressive forms of standardisation.