Three Essays on the Formation and Impact of Economic Policy

Introduction In my thesis I argue that economic policy is all about economics and politics. Consequently, analysing and understanding economic policy ideally has at least two parts. The economics part, which is centered around the expected impact of a specific policy on the real economy both in terms of efficiency and equity. The insights of this part point into which direction the fine-tuning of economic policies should go. However, fine-tuning of economic policies will be most likely subject to political constraints. That is why, in the politics part, a much better understanding can be gained by taking into account how the incentives of politicians and special interest groups as well as the role played by different institutional features affect the formation of economic policies. The first part and chapter of my thesis concentrates on the efficiency-related impact of economic policies: how does corporate income taxation in general, and corporate income tax progressivity in specific, affect the creation of new firms? Reduced progressivity and flat-rate taxes are in vogue. By 2009, 22 countries are operating flat-rate income tax systems, as do 7 US states and 14 Swiss cantons (for corporate income only). Tax reform proposals in the spirit of the "flat tax" model typically aim to reduce three parameters: the average tax burden, the progressivity of the tax schedule, and the complexity of the tax code. In joint work, Marius Brülhart and I explore the implications of changes in these three parameters on entrepreneurial activity, measured by counts of firm births in a panel of Swiss municipalities. Our results show that lower average tax rates and reduced complexity of the tax code promote firm births. Controlling for these effects, reduced progressivity inhibits firm births. Our reading of these results is that tax progressivity has an insurance effect that facilitates entrepreneurial risk taking. The positive effects of lower tax levels and reduced complexity are estimated to be significantly stronger than the negative effect of reduced progressivity. To the extent that firm births reflect desirable entrepreneurial dynamism, it is not the flattening of tax schedules that is key to successful tax reforms, but the lowering of average tax burdens and the simplification of tax codes. Flatness per se is of secondary importance and even appears to be detrimental to firm births. The second part of my thesis, which corresponds to the second and third chapter, concentrates on how economic policies are formed. By the nature of the analysis, these two chapters draw on a broader literature than the first chapter. Both economists and political scientists have done extensive research on how economic policies are formed. Thereby, researchers in both disciplines have recognised the importance of special interest groups trying to influence policy-making through various channels. In general, economists base their analysis on a formal and microeconomically founded approach, while abstracting from institutional details. In contrast, political scientists' frameworks are generally richer in terms of institutional features but lack the theoretical rigour of economists' approaches. I start from the economist's point of view. However, I try to borrow as much as possible from the findings of political science to gain a better understanding of how economic policies are formed in reality. In the second chapter, I take a theoretical approach and focus on the institutional policy framework to explore how interactions between different political institutions affect the outcome of trade policy in presence of special interest groups' lobbying. Standard political economy theory treats the government as a single institutional actor which sets tariffs by trading off social welfare against contributions from special interest groups seeking industry-specific protection from imports. However, these models lack important (institutional) features of reality. That is why, in my model, I split up the government into a legislative and executive branch which can both be lobbied by special interest groups. Furthermore, the legislative has the option to delegate its trade policy authority to the executive. I allow the executive to compensate the legislative in exchange for delegation. Despite ample anecdotal evidence, bargaining over delegation of trade policy authority has not yet been formally modelled in the literature. I show that delegation has an impact on policy formation in that it leads to lower equilibrium tariffs compared to a standard model without delegation. I also show that delegation will only take place if the lobby is not strong enough to prevent it. Furthermore, the option to delegate increases the bargaining power of the legislative at the expense of the lobbies. Therefore, the findings of this model can shed a light on why the U.S. Congress often practices delegation to the executive. In the final chapter of my thesis, my coauthor, Antonio Fidalgo, and I take a narrower approach and focus on the individual politician level of policy-making to explore how connections to private firms and networks within parliament affect individual politicians' decision-making. Theories in the spirit of the model of the second chapter show how campaign contributions from lobbies to politicians can influence economic policies. There exists an abundant empirical literature that analyses ties between firms and politicians based on campaign contributions. However, the evidence on the impact of campaign contributions is mixed, at best. In our paper, we analyse an alternative channel of influence in the shape of personal connections between politicians and firms through board membership. We identify a direct effect of board membership on individual politicians' voting behaviour and an indirect leverage effect when politicians with board connections influence non-connected peers. We assess the importance of these two effects using a vote in the Swiss parliament on a government bailout of the national airline, Swissair, in 2001, which serves as a natural experiment. We find that both the direct effect of connections to firms and the indirect leverage effect had a strong and positive impact on the probability that a politician supported the government bailout.

Secondary effects of catalytic diesel particulate filters: copper-induced formation of PCDD/Fs.

Potential risks of a secondary formation of polychlorinated dibenzodioxins/furans (PCDD/Fs) were assessed for two cordierite-based, wall-through diesel particulate filters (DPFs) for which soot combustion was either catalyzed with an iron- or a copper-based fuel additive. A heavy duty diesel engine was used as test platform, applying the eight-stage ISO 8178/4 C1 cycle. DPF applications neither affected the engine performance, nor did they increase NO, NO2, CO, and CO2 emissions. The latter is a metric for fuel consumption. THC emissions decreased by about 40% when deploying DPFs. PCDD/F emissions, with a focus on tetra- to octachlorinated congeners, were compared under standard and worst case conditions (enhanced chlorine uptake). The iron-catalyzed DPF neither increased PCDD/F emissions, nor did it change the congener pattern, even when traces of chlorine became available. In case of copper, PCDD/F emissions increased by up to 3 orders of magnitude from 22 to 200 to 12 700 pg I-TEQ/L with fuels of < 2, 14, and 110 microg/g chlorine, respectively. Mainly lower chlorinated DD/Fs were formed. Based on these substantial effects on PCDD/F emissions, the copper-catalyzed DPF system was not approved for workplace applications, whereas the iron system fulfilled all the specifications of the Swiss procedures for DPF approval (VERT).

Dirigent domain-containing protein is part of the machinery required for formation of the lignin-based Casparian strip in the root.

The endodermis acts as a "second skin" in plant roots by providing the cellular control necessary for the selective entry of water and solutes into the vascular system. To enable such control, Casparian strips span the cell wall of adjacent endodermal cells to form a tight junction that blocks extracellular diffusion across the endodermis. This junction is composed of lignin that is polymerized by oxidative coupling of monolignols through the action of a NADPH oxidase and peroxidases. Casparian strip domain proteins (CASPs) correctly position this biosynthetic machinery by forming a protein scaffold in the plasma membrane at the site where the Casparian strip forms. Here, we show that the dirigent-domain containing protein, enhanced suberin1 (ESB1), is part of this machinery, playing an essential role in the correct formation of Casparian strips. ESB1 is localized to Casparian strips in a CASP-dependent manner, and in the absence of ESB1, disordered and defective Casparian strips are formed. In addition, loss of ESB1 disrupts the localization of the CASP1 protein at the casparian strip domain, suggesting a reciprocal requirement for both ESB1 and CASPs in forming the casparian strip domain.

A role for the src family kinase Fyn in NK cell activation and the formation of the repertoire of Ly49 receptors.

NK cell function is regulated by a dual receptor system, which integrates signals from triggering receptors and MHC class I-specific inhibitory receptors. We show here that the src family kinase Fyn is required for efficient, NK cell-mediated lysis of target cells, which lack both self-MHC class I molecules and ligands for NKG2D, an activating NK cell receptor. In contrast, NK cell inhibition by the MHC class I-specific receptor Ly49A was independent of Fyn, suggesting that Fyn is specifically required for NK cell activation via non-MHC receptor(s). Compared to wild type, significantly fewer Fyn-deficient NK cells expressed the inhibitory Ly49A receptor. The presence of a transgenic Ly49A receptor together with its H-2(d) ligand strongly reduced the usage of endogenous Ly49 receptors in Fyn-deficient mice. These data suggest a model in which the repertoire of inhibitory Ly49 receptors is formed under the influenced of Fyn-dependent NK cell activation as well as the respective MHC class I environment. NK cells may acquire Ly49 receptors until they generate sufficient inhibitory signals to balance their activation levels. Such a process would ensure the induction of NK cell self-tolerance.

Positive Torsional Strain Causes the Formation of a Four-Way Junction at Replication Forks.

Research by L. Postow, C. Ullsperger, R.W. Keller, C. Bustamante, A.V. Vologodskii, and N.R. Cozzarelli, J. Biol. Chem. 2001, 276, 2790 Condensation and commentary by Alexander Bucka and Andrzej Stasiak, Universite ´ de Lausanne, Switzerland Purpose of the Study To demonstrate that positive torsional strain generated during DNA replication can lead to reversals of replication forks and, consequently can result in the formation of four-way DNA junctions

Chemical and carbon isotopic evolution of hydrocarbons during prograde metamorphism from 100°C to 550°C: Case study in the Liassic black shale formation of Central Swiss Alps

Hydrocarbon distributions and stable isotope ratios of carbonates (delta(13)C(car), delta(18)O(car)), kerogen (delta(13)C(ker)), extractable organic matter (delta(13)C(EOM)) and individual hydrocarbons of Liassic black shale samples from a prograde metamorphic sequence in the Swiss Alps were used to identify the major organic reactions with increasing metamorphic grade. The studied samples range from the diagenetic zone (< 100 degrees C) to amphibolite facies (similar to 550 degrees C). The samples within the diagenetic zones (< 100 and 150 degrees C) are characterized by the dominance of C-< 20 n-alkanes, suggesting an origin related with marine and/or bacterial inputs. The metamorphic samples (200 to 550 degrees C) have distributions significantly dominated by C-12 and C-13 n-alkanes, C-14, C-16 and C-18 n-alkylcyclopentanes and to a lesser extend C-15, C-17 and C-21 n-alkylcyclohexanes. The progressive C-13-enrichment (up to 3.9 parts per thousand) with metamorphism of the C-> 17 n-alkanes suggests the occurrence of cracking reactions of high molecular weight compounds. The isotopically heavier (up to 5.6 parts per thousand) C-< 17 n-alkanes in metamorphic samples are likely originated by thermal degradation of long-chain homologous with preferential release of isotopically light C-1 and C-2 radicals. The dominance of specific even C-number n-alkylcyclopentanes suggests an origin related to direct cyclization mechanism (without decarboxylation step) of algal or bacterial fatty acids occurring in reducing aqueous metamorphic fluid conditions. The regular increase of the concentrations of n-alkylcycloalkanes vs. C-> 13 n-alkanes with metamorphism suggests progressive thermal release of kerogen-linked fatty acid precursors and degradation of n-alkanes. Changes of the steroid and terpenoid distributions are clearly related to increasing metamorphic temperatures. The absence of 18 alpha(H)-22,29,30-trisnorneohopane (Ts), the occurrence of 17 beta(H)-trisnorhopane, 17 beta(H), 21 alpha(H)-hopanes in the C-29 to C-31 range and 5 alpha(H),14 alpha(H),17 alpha(H)-20R C-27, C-29 steranes in the low diagenetic samples (< 100 degrees C) are characteristic of immature bitumens. The higher thermal stress within the upper diagenetic zone (150 degrees C) is marked by the presence of Ts, the disappearance of 17 beta(H)-trisnorhopane and thermodynamic equilibrium of the 22S/(22S + 22R) homohopane ratios. The increase of the alpha alpha alpha-sterane 20S/(20S + 20R) and 20R beta beta/(beta beta + alpha alpha) ratios (from 0.0 to 0.55 and from 0.0 to 0.40, respectively) in the upper diagenetic zone indicates the occurrence of isomerization reactions already at < 150 degrees C. However, the isomerization at C-20 (R -> S) reaches thermodynamic equilibrium values already at the upper diagenesis (similar to 150 degrees C) whereas the epimerisation at C-14 and C-17 (alpha alpha ->beta beta) arrives to constant values in the lower anchizone (similar to 200 degrees C). The ratios Ts vs. 17 alpha(H)-22,29,30-trisnorneohopane [(Ts/(Ts + Tm)] and 18 alpha(H)-30-norneohopane (C29Ts) vs. 17 alpha(H),21 beta(H)-30-norhopane [C29Ts/(C29Ts + C-29)] increase until the medium anchizone (200 to 250 degrees C) from 0.0 to 0.96 and from 0.0 to 0.44, respectively. An opposite trend owards lower values is observed in the higher metamorphic samples. The occurrence of specific hydrocarbons (e.g., n-alkylcyclopentanes, cadalene, hydrogenated aromatic compounds) in metamorphic samples points to kerogen degradation reactions most probably occurring in the presence of water and under reducing conditions. The changes of hydrocarbon distributions and carbon isotopic compositions of n-alkanes related to metamorphism suggest that the organic geochemistry may help to evaluate the lowest grades of prograde metamorphism. Copyright (c) 2005 Elsevier Ltd.

Thy-1 binds to integrin beta(3) on astrocytes and triggers formation of focal contact sites.

BACKGROUND: Thy-1 is an abundant neuronal glycoprotein in mammals. Despite such prevalence, Thy-1 function remains largely obscure in the absence of a defined ligand. Astrocytes, ubiquitous cells of the brain, express a putative Thy-1 ligand that prevents neurite outgrowth. In this paper, a ligand molecule for Thy-1 was identified, and the consequences of Thy-1 binding for astrocyte function were investigated. RESULTS: Thy-1 has been implicated in cell adhesion and, indeed, all known Thy-1 sequences were found to contain an integrin binding, RGD-like sequence. Thy-1 interaction with beta3 integrin on astrocytes was demonstrated in an adhesion assay using a thymoma line (EL-4) expressing high levels of Thy-1. EL-4 cells bound to astrocytes five times more readily than EL-4(-f), control cells lacking Thy-1. Binding was blocked by either anti-Thy-1 or anti-beta3 antibodies, by RGD-related peptides, or by soluble Thy-1-Fc chimeras. However, neither RGE/RLE peptides nor Thy-1(RLE)-Fc fusion protein inhibited the interaction. Immobilized Thy-1-Fc, but not Thy-1(RLE)-Fc fusion protein supported the attachment and spreading of astrocytes in a Mn(2+)-dependent manner. Binding to Thy-1-Fc was inhibited by RGD peptides. Moreover, vitronectin, fibrinogen, denatured collagen (dcollagen), and a kistrin-derived peptide, but not fibronectin, also mediated Mn(2+)-dependent adhesion, suggesting the involvement of beta3 integrin. The addition of Thy-1 to matrix-bound astrocytes induced recruitment of paxillin, vinculin, and focal adhesion kinase (FAK) to focal contacts and increased tyrosine phosphorylation of proteins such as p130(Cas) and FAK. Furthermore, astrocyte binding to immobilized Thy-1-Fc alone was sufficient to promote focal adhesion formation and phosphorylation on tyrosine. CONCLUSIONS: Thy-1 binds to beta3 integrin and triggers tyrosine phosphorylation of focal adhesion proteins in astrocytes, thereby promoting focal adhesion formation, cell attachment, and spreading.

Innate signaling promotes formation of regulatory nitric oxide-producing dendritic cells limiting T-cell expansion in experimental autoimmune myocarditis.

BACKGROUND: Activation of innate pattern-recognition receptors promotes CD4+ T-cell-mediated autoimmune myocarditis and subsequent inflammatory cardiomyopathy. Mechanisms that counterregulate exaggerated heart-specific autoimmunity are poorly understood. METHODS AND RESULTS: Experimental autoimmune myocarditis was induced in BALB/c mice by immunization with α-myosin heavy chain peptide and complete Freund's adjuvant. Together with interferon-γ, heat-killed Mycobacterium tuberculosis, an essential component of complete Freund's adjuvant, converted CD11b(hi)CD11c(-) monocytes into tumor necrosis factor-α- and nitric oxide synthase 2-producing dendritic cells (TipDCs). Heat-killed M. tuberculosis stimulated production of nitric oxide synthase 2 via Toll-like receptor 2-mediated nuclear factor-κB activation. TipDCs limited antigen-specific T-cell expansion through nitric oxide synthase 2-dependent nitric oxide production. Moreover, they promoted nitric oxide synthase 2 production in hematopoietic and stromal cells in a paracrine manner. Consequently, nitric oxide synthase 2 production by both radiosensitive hematopoietic and radioresistant stromal cells prevented exacerbation of autoimmune myocarditis in vivo. CONCLUSIONS: Innate Toll-like receptor 2 stimulation promotes formation of regulatory TipDCs, which confine autoreactive T-cell responses in experimental autoimmune myocarditis via nitric oxide. Therefore, activation of innate pattern-recognition receptors is critical not only for disease induction but also for counterregulatory mechanisms, protecting the heart from exaggerated autoimmunity.

Arsenite interferes with protein folding and triggers formation of protein aggregates in yeast.

Several metals and metalloids profoundly affect biological systems, but their impact on the proteome and mechanisms of toxicity are not fully understood. Here, we demonstrate that arsenite causes protein aggregation in Saccharomyces cerevisiae. Various molecular chaperones were found to be associated with arsenite-induced aggregates indicating that this metalloid promotes protein misfolding. Using in vivo and in vitro assays, we show that proteins in the process of synthesis/folding are particularly sensitive to arsenite-induced aggregation, that arsenite interferes with protein folding by acting on unfolded polypeptides, and that arsenite directly inhibits chaperone activity. Thus, folding inhibition contributes to arsenite toxicity in two ways: by aggregate formation and by chaperone inhibition. Importantly, arsenite-induced protein aggregates can act as seeds committing other, labile proteins to misfold and aggregate. Our findings describe a novel mechanism of toxicity that may explain the suggested role of this metalloid in the etiology and pathogenesis of protein folding disorders associated with arsenic poisoning.

Two adjacent trimeric Fas ligands are required for Fas signaling and formation of a death-inducing signaling complex.

The membrane-bound form of Fas ligand (FasL) signals apoptosis in target cells through engagement of the death receptor Fas, whereas the proteolytically processed, soluble form of FasL does not induce cell death. However, soluble FasL can be rendered active upon cross-linking. Since the minimal extent of oligomerization of FasL that exerts cytotoxicity is unknown, we engineered hexameric proteins containing two trimers of FasL within the same molecule. This was achieved by fusing FasL to the Fc portion of immunoglobulin G1 or to the collagen domain of ACRP30/adiponectin. Trimeric FasL and hexameric FasL both bound to Fas, but only the hexameric forms were highly cytotoxic and competent to signal apoptosis via formation of a death-inducing signaling complex. Three sequential early events in Fas-mediated apoptosis could be dissected, namely, receptor binding, receptor activation, and recruitment of intracellular signaling molecules, each of which occurred independently of the subsequent one. These results demonstrate that the limited oligomerization of FasL, and most likely of some other tumor necrosis factor family ligands such as CD40L, is required for triggering of the signaling pathways.

The effect of COX-2 inhibitors on the formation of heterotopic bone in a rat model : O1323

Aims: 1) to create a new and reproducible animal model to produce heterotopic ossification (HO) 2) to be able to exactly quantify the amount of HO using a microCT scan and 3) to prove the hypothesis that COX-2 inhibitors are efficacious in the prevention of HO. Methods: We developed a IACUC-approved Lewis rat model, in which the ventral side of the right femur was scraped to mechanically disrupt the periosteum. By clamping the vastus intermedius ischemic injury to the muscle was produced to enhance HO. Finally homologous bone marrow from a donor rat was placed on the anterior surface of the femur. Half of the study group (8 rats) received chow mixed with a COX-2 inhibitor, while the other half received normal chow. After 6 weeks the animals were sacrificed, the femurs removed and imaged by microCT. Grading of HO was based on the thickness of ectopic bone as evaluated in a blinded fashion by 3 independent observers. Results: All animals developed bilateral HO. Rats treated with COX-2 inhibitors developed significantly less ectopic bone than the control group rats. Conclusions: The results suggest that we have created a very reliable, reproducible model to form ectopic bone in rats. Using the microCT we can precisely quantify the amount of HO. We have been able to show that COX-2 inhibitors significantly decrease the amount of HO formation and are thus a good alternative to non-specific NSAIDs with their potential serious side effects on the gastrointestinal tract and on hemo-stastis.