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 over time in Cambodia to identify their impact on out-of-pocket (OOP) payments. Among households with some OOP payment, HEFs reduce the amount paid by 35%, on average. The effect is larger for households that are poorer and mainly use public health care. Reimbursement of providers through a government operated scheme also reduces household OOP payments but the effect is not as well targeted on the poor. Both compensation models raise household non-medical consumption but have no impact on health-related debt. HEFs reduce the probability of primarily seeking care in the private sector.

Capitalism in the classroom : the impact of self-enhancement values and normative assessment on student motivation, goals and attitudes towards cheating

Abstract The neo-liberal capitalist ideology has come under heavy fire with anecdotal evidence indicating a link between these same values and unethical behavior. Academic institutions reflect social values and act as socializing agents for the young. Can this explain the high and increasing rates of cheating that currently prevail in education? Our first chapter examines the question of whether self-enhancement values of power and açhievement, the individual level equivalent of neo-liberal capitalist values, predict positive attitudes towards cheating. Furthermore, we explore the mediating role of motivational factors. Results of four studies reveal that self-enhancement value endorsement predicts the adoption of performance-approach goals, a relationship mediated by introjected regulation, namely desire for social approval and that self-enhancement value endorsement also predicts the condoning of cheating, a relationship mediated by performance-approach goal adoption. However, self-transcendence values prescribed by a normatively salient source have the potential to reduce the link between self-enhancement value endorsément and attitudes towards cheating. Normative assessment constitutes a key tool used by academic institutions to socialize young people to accept the competitive, meritocratic nature of a sociéty driven by a neo-liberal capitalist ideology. As such, the manifest function of grades is to motivate students to work hard and to buy into the competing ethos. Does normative assessment fulfill these functions? Our second chapter explores the reward-intrinsic motivation question in the context of grading, arguably a high-stakes reward. In two experiments, the relative capacity of graded high performance as compared to the task autonomy experienced in an ungraded task to predict post-task intrinsic motivation is assessed. Results show that whilst the graded task performance predicts post-task appreciation, it fails to predict ongoing motivation. However, perceived autonomy experienced in non-graded condition, predicts both post-task appreciation and ongoing motivation. Our third chapter asks whether normative assessment inspires the spirit of competition in students. Results of three experimental studies reveal that expectation of a grade for a task, compared to no grade, induces greater adoption of performance-avoidance, but not performance-approach, goals. Experiment 3 provides an explanatory mechanism for this, showing that reduced autonomous motivation experienced in previous graded tasks mediates the relationship between grading and adoption of performance avoidance goals in a subsequent task. The above results, when combined, provide evidence as to the deleterious effects of self enhancement values and the associated practice of normative assessment in school on student motivation, goals and ethics. We conclude by using value and motivation theory to explore solutions to this problem.

Que faire d'un stagiaire dans votre consultation [Tips for hosting a medical student in a PC consultation].

Hosting a medical student in one's primary care consultation challenges the practitioner to be a clinical teacher as well as providing high-quality patient care. A few tips can make this double task easier. Before the consultation it is possible to define the student's learning objectives and to plan the consultation. During the consultation itself some teaching models exist (One minute preceptor, SNAPP) that facilitate the teaching by maximising the teaching moments for each student-patient encounter. And finally after the consultation a time of reflection where both student and clinical teacher can think about what went well and what could be done better.

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

School Choice and Student Screening in the Chilean Educational System: Who Chooses Whom?. The Case of the Catholic Education

The student´s screening made by schools corresponds to a regulatory mechanism for school inclusion and exclusion that normally overlaps the parental expectations of school choice. Based in "Parents survey 2006" data (n=188.073) generated by the Chilean Educational Ministry, this paper describe the parents reasons for choosing their children's school, and school´s criteria for screening students. It concludes that the catholic schools are the most selective institutions and usually exceed the capacity of parental choice. One of the reasons to select students would be the direct relationship between this practice and increasing the average score on the test of the Chilean Educational Quality Measurement System (SIMCE).

Stability of repeated student evaluations of teaching in the second preclinical year of a medical curriculum

RESUME L'étude de la médecine à la Faculté de l'Université de Lausanne est un cursus de six ans. Depuis la réforme générale du curriculum en octobre 1995, le programme de la deuxième année consacrée à l'étude de l'être humain sain a été transformé. L'enseignement intégré par système ou organe a été introduit en remplaçant l'enseignement par discipline. Parallèlement, un système d'évaluation de l'enseignement par les étudiants a été proposé. Il a été amélioré au fil des années et depuis l'année académique 1998-99, l'évaluation est devenue systémique et régulière. Notre étude présente et compare les résultats des évaluations de l'enseignement et des enseignants de neuf cours intégrés dispensés en deuxième année durant deux années académiques (1998-99 et 1999-2000). Une forte corrélation entre les résultats des deux années consécutives ainsi qu'une importante disparité des estimations à l'intérieure de chacune de deux années ont été observées. Ceci démontre un engagement sérieux des étudiants dans le processus d'évaluation, révèle la pertinence de leur analyse et leur bonne capacité de discernement. L'analyse de nos résultats montre que les évaluations effectuées par les étudiants peuvent constituer une source fiable d'informations et contribuer à l'amélioration du processus d'enseignement.

Etude prospective d'évaluation psychiatrique et pédagogique dans un service pour adolescents de la Fondation Santé des Etudiants de France. Méthodologie et résultats préliminaires [Prospective study of psychiatric and pedagogic evaluation of the adolescent service of the Student Health Foundation of France. Methodology and preliminary results].

The present prospective study, with a five-year follow-up, presents an extensive psychiatric and educational assessment of an adolescent population (N = 30) in the age range 14-20, suffering from several psychiatric disorders, though apt to follow a normal academic program. The residential settings where the study took place provide both psychiatric and schooling facilities. In this environment, what is the effectiveness of long-term hospitalization? Are there any criteria for predicting results? After discharge, could social adjustments difficulties be prevented? Assessment instruments are described and the results of one preliminary study are presented. The actual data seems to confirm the impact of the special treatment facilities combining schooling and psychiatric settings on the long term outcome of adolescents.