Electricity markets modeling considering complex contracts and aggregators

All over the world, the liberalization of electricity markets, which follows different paradigms, has created new challenges for those involved in this sector. In order to respond to these challenges, electric power systems suffered a significant restructuring in its mode of operation and planning. This restructuring resulted in a considerable increase of the electric sector competitiveness. Particularly, the Ancillary Services (AS) market has been target of constant renovations in its operation mode as it is a targeted market for the trading of services, which have as main objective to ensure the operation of electric power systems with appropriate levels of stability, safety, quality, equity and competitiveness. In this way, with the increasing penetration of distributed energy resources including distributed generation, demand response, storage units and electric vehicles, it is essential to develop new smarter and hierarchical methods of operation of electric power systems. As these resources are mostly connected to the distribution network, it is important to consider the introduction of this kind of resources in AS delivery in order to achieve greater reliability and cost efficiency of electrical power systems operation. The main contribution of this work is the design and development of mechanisms and methodologies of AS market and for energy and AS joint market, considering different management entities of transmission and distribution networks. Several models developed in this work consider the most common AS in the liberalized market environment: Regulation Down; Regulation Up; Spinning Reserve and Non-Spinning Reserve. The presented models consider different rules and ways of operation, such as the division of market by network areas, which allows the congestion management of interconnections between areas; or the ancillary service cascading process, which allows the replacement of AS of superior quality by lower quality of AS, ensuring a better economic performance of the market. A major contribution of this work is the development an innovative methodology of market clearing process to be used in the energy and AS joint market, able to ensure viable and feasible solutions in markets, where there are technical constraints in the transmission network involving its division into areas or regions. The proposed method is based on the determination of Bialek topological factors and considers the contribution of the dispatch for all services of increase of generation (energy, Regulation Up, Spinning and Non-Spinning reserves) in network congestion. The use of Bialek factors in each iteration of the proposed methodology allows limiting the bids in the market while ensuring that the solution is feasible in any context of system operation. Another important contribution of this work is the model of the contribution of distributed energy resources in the ancillary services. In this way, a Virtual Power Player (VPP) is considered in order to aggregate, manage and interact with distributed energy resources. The VPP manages all the agents aggregated, being able to supply AS to the system operator, with the main purpose of participation in electricity market. In order to ensure their participation in the AS, the VPP should have a set of contracts with the agents that include a set of diversified and adapted rules to each kind of distributed resource. All methodologies developed and implemented in this work have been integrated into the MASCEM simulator, which is a simulator based on a multi-agent system that allows to study complex operation of electricity markets. In this way, the developed methodologies allow the simulator to cover more operation contexts of the present and future of the electricity market. In this way, this dissertation offers a huge contribution to the AS market simulation, based on models and mechanisms currently used in several real markets, as well as the introduction of innovative methodologies of market clearing process on the energy and AS joint market. This dissertation presents five case studies; each one consists of multiple scenarios. The first case study illustrates the application of AS market simulation considering several bids of market players. The energy and ancillary services joint market simulation is exposed in the second case study. In the third case study it is developed a comparison between the simulation of the joint market methodology, in which the player bids to the ancillary services is considered by network areas and a reference methodology. The fourth case study presents the simulation of joint market methodology based on Bialek topological distribution factors applied to transmission network with 7 buses managed by a TSO. The last case study presents a joint market model simulation which considers the aggregation of small players to a VPP, as well as complex contracts related to these entities. The case study comprises a distribution network with 33 buses managed by VPP, which comprises several kinds of distributed resources, such as photovoltaic, CHP, fuel cells, wind turbines, biomass, small hydro, municipal solid waste, demand response, and storage units.

Consumption, wealth, stock and housing returns: evidence from emerging markets

We test the predictive ability of the transitory deviations of consumption from its common trend with aggregate wealth and labour income, cay, for both future equity and housing risk premia in emerging market economies. Using quarterly data for 31 markets, our country-level evidence shows that forecasting power of cay vis-à-vis stock returns is high for Brazil, China, Colombia, Israel, Korea, Latvia and Malaysia. As for housing returns, the empirical evidence suggests that financial and housing assets are perceived as complements in the case of Chile, Russia, South Africa and Thailand, and as substitutes in Argentina, Brazil, Hong Kong, Indonesia, Korea, Malaysia, Mexico and Taiwan. Using a panel econometric framework, we find that the cross-country heterogeneity observed in asset return predictability does not accrue to regional location, but can be attributed to differences in the degree of equity market development and in the level of income.

Upgrade of an industrial building: BIM model of the as-built situation and evaluation of modifications

Dissertação de mestrado integrado in Civil Engineering

The impact of firing costs on turnover and unemployment: Evidence from the Colombian labour market reform

Reductions in firing costs are often advocated as a way of increasingthe dynamism of labour markets in both developed and less developed countries. Evidence from Europe and the U.S. on the impact of firing costs has, however, been mixed. Moreover, legislative changes both in Europe and the U.S. have been limited. This paper, instead, examines the impact of the Colombian Labour Market Reform of 1990, which substantially reduced dismissal costs. I estimate the incidence of a reduction in firing costs on worker turnover by exploiting the temporal change in the Colombian labour legislation as well as the variability in coverage between formal and informal sector workers. Using a grouping estimator to control for common aggregate shocks and selection, I find that the exit hazard rates into and out of unemployment increased after the reform by over 1% for formal workers (covered by the legislation) relative to informal workers (uncovered). The increase of the hazards implies a net decrease in unemployment of a third of a percentage point, which accounts for about one quarter of the fall in unemployment during the period of study.

Self-selection and risk selection on the Swiss health insurance market

Abstract This thesis presents three empirical studies in the field of health insurance in Switzerland. First we investigate the link between health insurance coverage and health care expenditures. We use claims data for over 60 000 adult individuals covered by a major Swiss Health Insurance Fund, followed for four years; the data show a strong positive correlation between coverage and expenditures. Two methods are developed and estimated in order to separate selection effects (due to individual choice of coverage) and incentive effects ("ex post moral hazard"). The first method uses the comparison between inpatient and outpatient expenditures to identify both effects and we conclude that both selection and incentive effects are significantly present in our data. The second method is based on a structural model of joint demand of health care and health insurance and makes the most of the change in the marginal cost of health care to identify selection and incentive effects. We conclude that the correlation between insurance coverage and health care expenditures may be decomposed into the two effects: 75% may be attributed to selection, and 25 % to incentive effects. Moreover, we estimate that a decrease in the coinsurance rate from 100% to 10% increases the marginal demand for health care by about 90% and from 100% to 0% by about 150%. Secondly, having shown that selection and incentive effects exist in the Swiss health insurance market, we present the consequence of this result in the context of risk adjustment. We show that if individuals choose their insurance coverage in function of their health status (selection effect), the optimal compensations should be function of the se- lection and incentive effects. Therefore, a risk adjustment mechanism which ignores these effects, as it is the case presently in Switzerland, will miss his main goal to eliminate incentives for sickness funds to select risks. Using a simplified model, we show that the optimal compensations have to take into account the distribution of risks through the insurance plans in case of self-selection in order to avoid incentives to select risks.Then, we apply our propositions to Swiss data and propose a simple econometric procedure to control for self-selection in the estimation of the risk adjustment formula in order to compute the optimal compensations.

Development of a Business Model that Supports Mobile Value-Added Services Market Creation in Emerging Countries

Tutkielman tavoitteena on luoda liiketoimintamalli, joka tukee langattomien matkaviestintäpalveluiden markkinoiden luomista kehittyvillä markkinoilla. Teoreettinen osa tarkastelee langattomien matkaviestintäpalveluiden liiketoimintamallin kehittämisen tärkeimpiä elementtejä CIS maissa. Teoreettisen kappaleen tuloksena saadaan puitteet, jonka avulla liiketoimintamalli matkaviestintäpalveluille voidaan kehittää. Tutkielman empiirinen osa on toteutettu case tutkimuksena, jonka tavoitteena on ollut langattomien matkaviestintäpalvelujen markkinoiden luominen CIS maissa. Pääasiallinen empiirisen tiedon lähde on ollut teemahaastattelut. Tuloksena saatuja empiirisen osan tietoja verrataan teoriakappaleen vastaaviin tuloksiin Tulokset osoittavat, että radikaalin korkean teknologian innovaation markkinoiden luominen on hidas prosessi, joka vaatii kärsivällisyyttä yritykseltä. Markkinoiden, teknologian ja strategian epävarmuustekijät tuovat epävarmuutta kehittyvälle toimialalle ja markkinoille, joka vaikeuttaa liiketoimintamallin kehittämistä. Tärkein tekijä on palvelujen markkinointi ennemmin kuin teknologian. Avain kyvykkyys markkinoiden luomisessa on oppiminen, ei tietäminen.

The Evolution of Securities Lending and Risk Mitigation: A Finnish Market Case Study

Although securities lending is an important function of the financial markets, it has not received that much academic attention. This study examines the evolution of European securities lending and risk management with an emphasis on the development of collateral management, the function responsible for reducing credit risk. The effects of the recent financial instabilities are also considered. The evolution of the Finnish securities lending market is examined in more detail through a case-study. This study can be classified as a constructive qualitative case study. The initial practical knowledge comes from the author's own experience and additional insight and theoretical background is acquired through a literature review. The case study is based on research, semi-structured interviews and a brief analysis of numerical data. The main observation of this study was that securities lending is now recognized as more of an investment management discipline than an operational support function. The recent financial instabilities have resulted in an increased focus on risk and transparency. In securities lending this is directly reflected in collateral management guidelines and procedures. Collateral management has become increasingly technologically developed and automated. Collateral optimization initiatives have been started to make the process more efficient, liquid, and cost effective. Although securities lending is generally an OTC-market with no standard market place, centralized exchange-like models have been introduced. Finnish securities lending has now shifted towards the more common global OTC model. Although the Finnish securities lending industry has developed, and the main laws governing it (tax legislation) have changed, there is still need for development. There are still not many Finnish participants involved and due to legal issues most securities loans are collateralized with cash and not securities (e.g. government bonds).

Performance of active portfolio management and the effect of stock market trend

Purpose of the study is to evaluate performance of active portfolio management and the effect of stock market trend on the performance. Theory of efficient markets states that market prices reflect all available information and that all investors share a common view of future price developments. This view gives little room for the success of active management, but the theory has been disputed – at least the level of efficiency. Behavioral finance has developed theories that identify irrational behavior patterns of investors. For example, investment decisions are not made independent of past market developments. These findings give reason to believe that also the performance of active portfolio management may depend on market developments. Performance of 16 Finnish equity funds is evaluated during the period of 2005 to 2011. In addition two sub periods are constructed, a bull market period and a bear market period. The sub periods are created by joining together the two bull market phases and the two bear market phases of the whole period. This allows for the comparison of the two different market states. Performance of the funds is measured with risk-adjusted performance by Modigliani and Modigliani (1997), abnormal return over the CAPM by Jensen (1968), and market timing by Henriksson and Merton (1981). The results suggested that in average the funds are not able to outperform the market portfolio. However, the underperformance was found to be lower than the management fees in average which suggests that portfolio managers are able to do successful investment decisions to some extent. The study revealed substantial dependence on the market trend for all of the measures. The risk-adjusted performance measure suggested that in bear markets active portfolio managers in average are able to beat the market portfolio but not in bull markets. Jensen´s alpha and the market timing model also showed striking differences between the two market states. The results of these two measures were, however, somewhat problematic and reliable conclusions about the performance could not be drawn.

Market integration, return and volatility dynamics; empirical evidence from African stock markets

Frontier and Emerging economies have implemented policies with the objective of liberalizing their equity markets. Equity market liberalization opens the domestic equity market to foreign investors and as well paves the way for domestic investors to invest in foreign equity securities. Among other things, equity market liberalization results in diversification benefits. Moreover, equity market liberalization leads to low cost of equity capital resulting from the lower rate of return by investors. Additionally, foreign and local investors share any potential risks. Liberalized equity markets also become liquid considering that there are more investors to trade. Equity market liberalization results in financial integration which explains the movement of two markets. In crisis period, increased volatility and co-movement between two markets may result in what is termed contagion effects. In Africa, major moves toward financial liberalization generally started in the late 1980s with South Africa as the pioneer. Over the years, researchers have studied the impact of financial liberalization on Africa’s economic development with diverse results; some being positive, others negative and still others being mixed. The objective of this study is to establish whether African stock-markets are integrated into the United States (US) and World market. Furthermore, the study helps to see if there are international linkages between the Africa, US and the world markets. A Bivariate- VAR- GARCH- BEKK model is employed in the study. In the study, the effect of thin trading is removed through series of econometric data purification. This is because thin trading, also known as non-trading or inconsistency of trading, is a main feature of African markets and may trigger inconsistency and biased results. The study confirmed the widely established results that the South Africa and Egypt stock markets are highly integrated with the US and World market. Interestingly, the study adds to knowledge in this research area by establishing the fact that Kenya is very integrated with the US and World markets and that it receives and exports past innovations as well as shocks to and from the US and World market.

Cooperative strategy in emerging markets - analysis of interfirm r&d cooperation and performance in Russian manufacturing companies

Emerging markets have come to play a significant role in the world, not only due to their strong economic growth but because they have been able to foster an increasing number of innovative high technology oriented firms. However, as the markets continue to change and develop, there remain many companies in emerging markets that struggle with their competitiveness and innovativeness. To improve competitive capabilities, many scholars have come to favor interfirm cooperation, which is perceived to help companies access new knowledge and complementary resources and, by so doing, enables them to catch up quickly with Western competitors. Regardless of numerous attempts by strategic management scholars, the research field remains very fragmented and lacks understanding on how and when interfirm cooperation contributes to firm performance and competiveness in emerging markets. Furthermore, the reasons why interfirm R&D sometimes succeeds but fails at other times frequently remain unidentified. This thesis combines the extant literature on competitive and cooperative strategy, dynamic capabilities, and R&D cooperation while studying interfirm R&D relationships in and between Russian manufacturing companies. Employing primary survey data, the thesis presents numerous novel findings regarding the effect of R&D cooperation and different types of R&D partner on firms’ exploration and exploitation performance. Utilizing a competitive strategy framework enables these effects to be explained in more detail, and especially why interfirm cooperation, regardless of its potential, has had a modest effect on the general competitiveness of emerging market firms. This thesis contributes especially to the strategic management literature and presents a more holistic perspective on the usefulness of cooperative strategy in emerging markets. It provides a framework through which it is possible to assess the potential impacts of different R&D cooperation partners and to clarify the causal relationships between cooperation, performance, and long term competitiveness.

Institutional environment in North Korea: market structure and overcoming institutional voids

Tutkimus sai innoituksensa, kun tutkija huomasi tarpeen liiketaloudelliselle, ajantasaiselle ja realistiselle tutkimukselle Pohjois-Korean markkinoista, joka kuvailisi markkinoiden olemassaolevia ja puuttuvia rakenteita sekä tutkisi mahdollisuuksia ylittää puuttuvat rakenteet. Institutionaalinen teoria valittiin sopivaksi viitekehykseksi kuvailla ja tutkia markkinarakennetta. Tutkimuskysymys muotoiltiin seuraavasti: “Miten ulkomaiset yritykset voivat reagoida puuttuviin markkinarakenteisiin Pohjois-Koreassa?”. Tutkimuskysymys jaettiin kolmeen osakysymykseen: (1) Millainen on Pohjois-Korean markkinoiden institutionaalinen ympäristö? (2) Mitkä ovat merkittävimmät puuttuvat markkinarakenteet Pohjois-Koreassa? (3) Mitä mahdollisuuksia ulkomaisilla yrityksillä voisi olla reagoida puuttuviin markkinarakenteisiin? Tutkimus toteutettiin kvalitatiivisena, koska tutkimuskysymys on deskriptiivinen. Aineisto kerättiin asiantuntijahaastattelun ja kvalitatiivisen sisällönanalyysin keinoin. Primääriaineiston muodostavat 2 asiantuntijahaastattelua ja sekundääriaineiston muodostavat 95 artikkelia, jotka kerättiin 40 lähteestä. Aineisto analysoitiin kvalitatiivisen sisällönanalyysin keinoin. Aineisto koodattiin, luokiteltiin ja esitettiin kokonaisuuksina luokittelurungon avulla, joka laadittiin tutkimusta varten muodostetun teoreettisen viitekehyksen mukaan. Tulokset ja johtopäätökset voidaan tiivistää seuraavasti. (1) Pohjois-Korean markkinan instituutioihin vaikuttaa kaksoisrakenne, jossa muodollinen, sosialistinen rakenne ja epämuodollinen, markkinalähtöinen rakenne toimivat päällekkäin. (2) Puuttuvia rakenteita on sekä markkinan kontekstissa että markkinatasolla. Puutteet ovat osittain seurausta vanhojen rakenteiden korvaantumisesta uusilla, jotka eivät ole institutionalisoituneet. (3) Yritykset voivat käyttää samoja mahdollisuuuksia reagoida puuttuviin markkinarakenteisiin Pohjois-Koreassa, joita kehittyvien markkinoiden yhteydessä on esitetty. Sen tulkittiin vähentävän käsitystä, jonka mukaan Pohjois-Korean markkina on liian erikoinen yritystoiminnalle. (4) Kasvava keskiluokka sekä yrittäjyyden ja naisten yhä merkittävämpi rooli liike-elämässä aiheuttavat alhaalta ylöspäin suuntautuvaa kehitystä markkinoilla. Nämä ovat merkkejä viimeaikaisesta kehityksestä, jotka eivät ole saaneet laajaa huomiota länsimaisessa mediassa. Se korostaa tarvetta liiketaloudelliselle, ajantasaiselle jatkotutkimukselle Pohjois-Korean markkinoista.

Institutional environment in North Korea: market structure and overcoming institutional voids

The research was sparked by an exchange in South Korea, as the author identified a gap in research that provides economic, up to date and realistic information about the North Korean market in English language. A need for a research was identified that would describe the market’s existing and missing market structures and explore possibilities to overcome the missing market structures. Institutional theory was chosen as a suitable framework to describe and explore the market. The research question was formulated as follows: “How can foreign companies overcome institutional voids in the North Korean market?”. To answer the research question, it was divided into three sub-questions as follows: (1) What is the institutional environment in North Korea like? (2) What are the major institutional voids in the North Korean market? (3) What possibilities do foreign companies have to overcome institutional voids? The research is qualitative by nature due to the descriptive and exploratory nature of the research question. Data collection consisted of expert interview and content analysis, resulting in primary data of two interviews and secondary data of 95 articles from 40 different sources. The data was analyzed with the systematical technique of content analysis. The data was coded, classified and presented as concepts with the help of a classification system that was build following the theoretical framework adapted for this study. The findings can be summarized as follows. (1) The market institutions are characterized by an overlapping dual system of formal, socialist structures and informal, market-oriented structures. (2) Institutional voids prevail on both the market’s contextual and on the market level. They are partly result of old institutions being replaced by new institutions that lack institutionalization. (3) Identified possibilities to overcome institutional voids correspond with possibilities drawn from previous research. This decreases the image of North Korea as an impossibly unique market to operate in. (4) Emerging middle class, rapidly growing entrepreneurial activities and women’s increasing role in business drive a down-to-up change in the market. This signals the recent development of the market, yet has been overlooked in the Western media. Thus there is a need for further economic, up to date research concerning North Korea.

Drivers of Local Firms’ Focus on Internal R&D in Emerging Economies and Their International Performance

Grounded on the resource-based view of the firm, the study of this thesis investigates the effect of four internal and external factors – engineer intensity, location, affiliation with the government, government funding – on Chinese firms’ decision to either invest in internal R&D activities or external R&D and the effect of this decision on the firms’ international market success. In addition, the moderating role of the presence of foreign firms in China is examined. To understand these relationships, the thesis’ theorization focuses on the issue of how firms can combine optimally the two options – “internal R&D” and “external R&D”. In this regard I juxtapose internal R&D and external R&D and compare their advantages and disadvantages. To test my model, I apply panel data from the Annual Industrial Survey Database provided by the Chinese National Bureau of Statistics. My results show that three of the four investigated factors affect Chinese firms’ resource allocation decisions; and effective resource allocation decisions lead effectively to international market success, strengthened by the presence of foreign firms in China. Moreover the findings bear several theoretical and managerial contributions. First I propose the last dimension of the “VRIO framework” – “organization” – as an endogenous component of the VRIO framework, as my study investigated how firms can effectively combine resources to generate a competitive advantage in terms of international market success. Previous academic literature so far focused on examining whether internal and external R&D are complements or substitutes. My study fills a gap in the literature by investigating the determinants of the efficient combination of the two strategies and the outcome of the combination. One of the managerial implications is that Chinese firms can learn from foreign companies that are present in China.

Caracterización de la relación estratégica comunitaria y la salud financiera en empresas de mercados emergentes

El presente proyecto, se planteó una necesidad clara por satisfacer. Las organizaciones hoy en día, necesitan nuevas herramientas que permitan predecir y minimizar riesgos de mercado, con el fin de mejorar su desempeño, su competitividad, su salud financiera y sobre todo, ser más perdurables en ambientes caóticos e inestables. Se planteó un objetivo claro a cumplir, cómo pueden las empresas mejorar su relación con los consumidores y sus comunidades, con el fin de, identificar factores que impacten positivamente la salud financiera de las organizaciones. Es pertinente, el estudio de la salud financiera en empresas de mercados emergentes y los impactos en la implementación de diferentes estrategias comunitarias para establecer métodos que minimicen los riesgos y mejoren el desempeño empresarial. Para cumplir la propuesta planteada, fue necesario abarcar diferentes fuentes de información relacionadas a temas financieros y de mercadeo. Se buscó, tomar ejemplos, teorías y modelos ya implementados en estudios similares y con objetivos en común, relacionados a: uso de indicadores financieros, valoración corporativa, valoración de los estados financieros, diagnóstico de la salud financiera, el uso de estrategias de mercadeo relacional, la fidelización de clientes y el uso de estrategias comunitarias. Además, fue necesaria la búsqueda de empresas en los mercados emergentes de Brasil y Colombia, que representan el tipo de muestra deseada para desarrollar el estudio y sus objetivos. A dicha empresa, se le realizará una serie de estudios para poder satisfacer las necesidades planteadas en el presente proyecto. Por medio de dichos estudios, se pretende identificar relaciones en el uso de estrategias comunitarias y sus impactos en la salud financiera de las organizaciones. Es importante, identificar factores de riesgo y de protección para prevenir impactos negativos o potencializar aquellos que beneficien a las empresas. Con lo anterior, será posible obtener pruebas o herramientas que mejoren los procesos de toma de decisiones de alta dirección, la formulación de directrices en estrategia corporativa y definición de ventajas competitivas de la organización. Se pretende, brindar una aproximación a nuevos conocimientos y enfoques de estudios, expuestos en el proyecto, para mejorar la ciencia de la gestión, el desempeño y la perdurabilidad empresarial en mercados emergentes. El proyecto, tomó como fuente de estudio, el banco Brasileño Itau Unibanco Holding S.A. que representa de la mejor forma, el tipo de muestra necesaria para poder cumplir con los objetivos planteados. El banco, tienen presencia en la región bastante importante y sigue con metas de expansión e internacionalización. Además de eso, es considerado el banco privado más grande de Brasil, el cuarto mayor de Chile y la quinta institución financiera de Colombia. Ha sido ganador, de varios galardones y reconocimiento por sus buenas practicas, su enfoque hacia la sostenibilidad, la sociedad, el buen ambiente y los derechos. El proyecto, culminó demostrando que efectivamente el uso de estrategias comunitarias tiene un impacto importante en la imagen corporativa, la reputación y como consecuencia, en la estabilidad financiera. Se evidenció, también, el desempeño del banco Itau Unibanco Holding del año 2013, donde, se aplicaron diferentes estudios, indicadores y demás, que demostraron un buen resultado, y por ende, una fuerte posición y salud financiera. Adicionalmente, se mostraron diferentes tipos de estrategias que el banco usa hoy en día dirigidas a las comunidades, evidenciando ejemplos en Brasil y en Chile y describiendo los proyectos, los programas o las estrategias que el banco usa para aportar a la comunidad, ser parte de la sociedad, mejorar su imagen, aumentar su reputación, profundizar en la caracterización de las necesidades de sus consumidores y revertir todo lo anterior en mejores soluciones, mejores productos y mejores formas de relacionamiento. Dicha integración en el ambiente y en el entorno de sus consumidores impacta de buena manera los resultados financieros y permite que la posición en el mercado se mantenga fuerte y firme.

Productivity, demand and the home market effect

The causality between international trade and industrialization is still ambiguous. We consider a model of international trade with the Home Market Effect - with differences in income and productivity between sectors and between countries - in order to identify additional channels for determining the effects of international trade on industrialization. Introducing non-homothetic preferences and differences in productivity aids in the interpretation of any apparent paradoxes within international trade, such as the commercial relations between more populated countries like China and India and large economies such as the U.S. Population size, demand composition and productivity levels constitute the three main channels for determining the effects of international trade. Interactions among these channels define the results obtained in terms of industrialization, while welfare levels are always higher in relation to autarky.