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.

Assessment of the carotid artery by MRI at 3T: a study on reproducibility

PURPOSE: To examine the reproducibility of carotid artery dimension measurements using 3T MRI. MATERIALS AND METHODS: Ten healthy volunteers underwent three scans on two occasions for assessment of total vessel wall area (TVWA), total luminal area (TLA), and minimum (MinT) and maximum (MaxT) vessel wall thickness. A double inversion-recovery (IR) fast gradient-echo (FGRE) sequence was used on a commercial 3T system. During the first visit the subjects were scanned twice. The third scan was performed at least four days later. One observer traced all scans, and a second observer retraced the first scan series. RESULTS: For TVWA an interclass correlation (ICC) of 0.994 was calculated with all three scans taken into account. The interobserver ICC was 0.984. The agreement between the scans for TLA showed an ICC of 0.982 with an interobserver ICC of 0.998. For MinT and MaxT an ICC of 0.843 and 0.935 were calculated, with interobserver ICCs of 0.860 and 0.726, respectively. CONCLUSION: With the use of a commercial 3T MR system, TVWA, TLA, and wall thickness measurements of the carotid artery can be assessed with good reproducibility.

General Practitioners' willingness to pay for continuing medical education in a fee-for-service universal coverage health care system

Background: Sponsoring of physicians meetings by life science companies has led to reduced participation fees but might influence physician's prescription practices. A ban on such sponsoring may increase participation fees. We aimed to evaluate factors associated with physicians' willingness to pay for medical meetings, their position on the sponsoring of medical meetings and their opinion on alternative financing options. Methods: An anonymous web-based questionnaire was sent to 447 general practitioners in one state in Switzerland, identified through their affiliation to a medical association. The questionnaire evaluated physicians' willingness to pay for medical meetings, their perception of a bias in prescription practices induced by commercial support, their opinion on the introduction of a binding legislation and alternative financing options, their frequency of exchange with sales representatives and other relevant socioeconomic factors. We built a multivariate predictor logistic regression model to identify determinants of willingness to pay. Results: Of the 115 physicians who responded (response rate 26%), 48% were willing to pay more than what they currently pay for congresses, 79% disagreed that commercial support introduced a bias in their prescription practices and 61% disagreed that it introduced a bias in their colleagues' prescription practices. Based on the multivariate logistic regression, perception of a bias in peers prescription practices (OR=7.47, 95% CI 1.65-38.18) and group practice structure (OR=4.62, 95% CI 1.34-22.29) were significantly associated with an increase in willingness to pay. Two thirds (76%) of physicians did not support the introduction of a binding legislation and 53% were in favour of creating a general fund administered by an independent body. Conclusion: Our results suggest that almost half of physicians surveyed are willing to pay more than what they currently pay for congresses. Predictors of an increase in physicians' willingness to pay were perception of the influence of bias in peers prescription practices and group practice structure. Most responders did not agree that sponsoring introduced prescribing bias nor did they support the 2 introduction of a binding legislation prohibiting sponsoring but a majority did agree to an independent body that would centrally administer a general fund.

Impact of a computerized physician order entry system on compliance with prescription accuracy requirements.

OBJECTIVE: To assess the change in non-compliant items in prescription orders following the implementation of a computerized physician order entry (CPOE) system named PreDiMed. SETTING: The department of internal medicine (39 and 38 beds) in two regional hospitals in Canton Vaud, Switzerland. METHOD: The prescription lines in 100 pre- and 100 post-implementation patients' files were classified according to three modes of administration (medicines for oral or other non-parenteral uses; medicines administered parenterally or via nasogastric tube; pro re nata (PRN), as needed) and analyzed for a number of relevant variables constitutive of medical prescriptions. MAIN OUTCOME MEASURE: The monitored variables depended on the pharmaceutical category and included mainly name of medicine, pharmaceutical form, posology and route of administration, diluting solution, flow rate and identification of prescriber. RESULTS: In 2,099 prescription lines, the total number of non-compliant items was 2,265 before CPOE implementation, or 1.079 non-compliant items per line. Two-thirds of these were due to missing information, and the remaining third to incomplete information. In 2,074 prescription lines post-CPOE implementation, the number of non-compliant items had decreased to 221, or 0.107 non-compliant item per line, a dramatic 10-fold decrease (chi(2) = 4615; P < 10(-6)). Limitations of the computerized system were the risk for erroneous items in some non-prefilled fields and ambiguity due to a field with doses shown on commercial products. CONCLUSION: The deployment of PreDiMed in two departments of internal medicine has led to a major improvement in formal aspects of physicians' prescriptions. Some limitations of the first version of PreDiMed were unveiled and are being corrected.

Method to assess and optimise dependability of complex macro-systems: application to a railway signalling system

Achieving a high degree of dependability in complex macro-systems is challenging. Because of the large number of components and numerous independent teams involved, an overview of the global system performance is usually lacking to support both design and operation adequately. A functional failure mode, effects and criticality analysis (FMECA) approach is proposed to address the dependability optimisation of large and complex systems. The basic inductive model FMECA has been enriched to include considerations such as operational procedures, alarm systems. environmental and human factors, as well as operation in degraded mode. Its implementation on a commercial software tool allows an active linking between the functional layers of the system and facilitates data processing and retrieval, which enables to contribute actively to the system optimisation. The proposed methodology has been applied to optimise dependability in a railway signalling system. Signalling systems are typical example of large complex systems made of multiple hierarchical layers. The proposed approach appears appropriate to assess the global risk- and availability-level of the system as well as to identify its vulnerabilities. This enriched-FMECA approach enables to overcome some of the limitations and pitfalls previously reported with classical FMECA approaches.

Sanitary quality of edible bivalve mollusks in Southeastern Brazil using an UV based depuration system

The increase in seafood production, especially in mariculture worldwide, has brought out the need of continued monitoring of shellfish production areas in order to ensure safety to human consumption. The purpose of this research was to evaluate pathogenic protozoa, viruses and bacteria contamination in oysters before and after UV depuration procedure, in brackish waters at all stages of cultivation and treatment steps and to enumerate microbiological indicators of fecal contamination from production site up to depuration site in an oyster cooperative located at the Southeastern estuarine area of Brazil. Oysters and brackish water were collected monthly from September 2009 to November 2010. Four sampling sites were selected for enteropathogens analysis: site 1- oyster growth, site 2- catchment water (before UV depuration procedure), site 3 - filtration stage of water treatment (only for protozoa analysis) and site 4- oyster's depuration tank. Three microbiological indicators ! were examined at sites 1, 2 and 4. The following pathogenic microorganisms were searched: Giardia cysts, Cryptosporidium oocysts, Human Adenovirus (HAdV), Hepatitis A virus (HAV), Human Norovirus (HnoV) (genogroups I and II), JC strain Polyomavirus (JCPyV) and Salmonella sp. Analysis consisted of molecular detection (qPCR) for viruses (oysters and water samples); immunomagnetic separation followed by direct immunofluorescence assay for Cryptosporidium oocysts and Giardia cysts and also molecular detection (PCR) for the latter (oysters and water samples); commercial kit (Reveal-Neogee (R)) for Salmonella analysis (oysters). Giardia was the most prevalent pathogen in all sites where it was detected: 36.3%, 18.1%, 36.3% and 27.2% of water from sites 1, 2, 3 and 4 respectively; 36.3% of oysters from site 1 and 54.5% of depurated oysters were harboring Giardia cysts. The huge majority of contaminated samples were classified as Giardia duodenalis. HAdv was detected in water and o! ysters from growth site and HnoV GI in two batches of oysters ! (site 1) in huge concentrations (2.11 x 10(13), 3.10 x 10(12) gc/g). In depuration tank site, Salmonella sp., HAV (4.84 x 10(3)) and HnoV GII (7.97 x 10(14)) were detected once in different batches of oysters. Cryptosporidium spp. oocysts were present in 9.0% of water samples from site four. These results reflect the contamination of oysters even when UV depuration procedures are employed in this shellfish treatment plant. Moreover, the molecular comprehension of the sources of contamination is necessary to develop an efficient management strategy allied to shellfish treatment improvement to prevent foodborne illnesses. (C) 2011 Elsevier Ltd. All rights reserved.