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.

On the Structural Difference between the Evolutionary Approach of Young and that of Kandori, Mailath, and Rob

We provide robust examples of symmetric two-player coordination games in normal form that reveal that equilibrium selection by the evolutionary model of Young (1993) is essentially different from equilibrium selection by the evolutionary model of Kandori, Mailath and Rob (1993).

Narrative interviews: an important resource in qualitative research

Objetives This methodological study explain and emphasize the extent and fertility of the narrative interview in qualitative research. Methods To describe the narrative method within the qualitative research. Results The qualitative research method is characterized by addressing issues related to the singularities of the field and individuals investigated, being the narrative interviews a powerful method for use by researchers who aggregate it. They allow the deepening of research, the combination of life stories with socio-historical contexts, making the understanding of the senses that produce changes in the beliefs and values that motivate and justify the actions of possible informants. Conclusion The use of narrative is an advantageous investigative resource in qualitative research, in which the narrative is a traditional form of communication whose purpose is to serve content from which the subjective experiences can be transmitted.

Effect of age on intraoperative cerebrovascular autoregulation and near-infrared spectroscopy-derived cerebral oxygenation.

Background. Age is an important risk factor for perioperative cerebral complications such as stroke, postoperative cognitive dysfunction, and delirium. We explored the hypothesis that intraoperative cerebrovascular autoregulation is less efficient and brain tissue oxygenation lower in elderly patients, thus, increasing the vulnerability of elderly brains to systemic insults such as hypotension.Methods. We monitored intraoperative cerebral perfusion in 50 patients aged 18-40 and 77 patients >65 yr at two Swiss university hospitals. Mean arterial pressure (MAP) was measured continuously using a plethysmographic method. An index of cerebrovascular autoregulation (Mx) was calculated based on changes in transcranial Doppler flow velocity due to changes in MAP. Cerebral oxygenation was assessed by the tissue oxygenation index (TOI) using near-infrared spectroscopy. End-tidal CO(2), O(2), and sevoflurane concentrations and peripheral oxygen saturation were recorded continuously. Standardized anaesthesia was administered in all patients (thiopental, sevoflurane, fentanyl, atracurium).Results. Autoregulation was less efficient in patients aged >65 yr [by 0.10 (SE 0.04; P=0.020)] in a multivariable linear regression analysis. This difference was not attributable to differences in MAP, end-tidal CO2, or higher doses of sevoflurane. TOI was not significantly associated with age, sevoflurane dose, or Mx but increased with increasing flow velocity [by 0.09 (SE 0.04; P=0.028)] and increasing MAP [by 0.11 (SE 0.05; P=0.043)].Conclusions. Our results do not support the hypothesis that older patients' brains are more vulnerable to systemic insults. The difference of autoregulation between the two groups was small and most likely clinically insignificant.

Acute effects of transmyocardial laser revascularization on left-ventricular function: an haemodynamic and echocardiographic study.

While the lesions produced by transmyocardial laser revascularisation (TMLR) induce scar formation, it is important to determine whether this procedure can be deleterious for the left-ventricular function, which is already impaired by the underlying ischaemic process in some patients. Ten channels were drilled in the left lateral wall of the hearts of ten pigs (mean weight, 61 +/- 8.2kg) with a Holmium:YAG laser. Haemodynamic measurements and echocardiographic assessment of left-ventricular function were performed before the TMLR procedure, 5 and 30 min after, and lastly after 5 min of pacing at a rate increased by 30% of the baseline value. Echocardiographic assessment was in the short axis at the level of the laser channels, and included left-ventricular ejection fraction and segmental wall motility of the lasered area (scale 0-3:0 = normal 1 = hypokinesia, 2 = akinesia, 3 = dyskinesia). Values at 5 and 30 min were compared with baseline values; the difference was considered significant if p < 0.05. Haemodynamical values were stable throughout all the procedures. The ejection fraction showed a slight but significant decrease 5 min after the creation of the channels (60.4 +/- 6.8% vs 54 +/- 7.6%, p=0.02) and recovered at 30min. The segmental motility score of the involved areas increased to 1 after 5 min in five animals, and came back to 0 at 30 min except in one animal. Even with pacing no segmental dysfunction occurred. The reversibility of the segmental hypokinesia induced by TMLR, as well as the absence of pace-induced dysfunction 30 min after the procedure strongly suggest the inocuity of TMLR in this experimental set-up.

Natural variability of in vitro adherence to fibrinogen and fibronectin does not correlate with in vivo infectivity of Staphylococcus aureus.

Adherence to fibrinogen and fibronectin plays a crucial role in Staphylococcus aureus experimental endocarditis. Previous genetic studies have shown that infection and carriage isolates do not systematically differ in their virulence-related genes, including genes conferring adherence, such as clfA and fnbA. We set out to determine the range of adherence phenotypes in carriage isolates of S. aureus, to compare the adherence of these isolates to the adherence of infection isolates, and to determine the relationship between adherence and infectivity in a rat model of experimental endocarditis. A total of 133 healthy carriage isolates were screened for in vitro adherence to fibrinogen and fibronectin, and 30 isolates were randomly chosen for further investigation. These 30 isolates were compared to 30 infective endocarditis isolates and 30 blood culture isolates. The infectivities of the carriage isolates, which displayed either extremely low or high adherence to fibrinogen and fibronectin, were tested using a rat model of experimental endocarditis. The levels of adherence to both fibrinogen and fibronectin were very similar for isolates from healthy carriers and members of the two groups of infection isolates. All three groups of isolates showed a wide range of adherence to fibrinogen and fibronectin. Moreover, the carriage isolates that showed minimal adherence and the carriage isolates that showed strong adherence had the same infectivity in experimental endocarditis. Adherence was proven to be important for pathogenesis in experimental endocarditis, but even the least adherent carriage strains had the ability to induce infection. We discuss the roles of differential gene expression, human host factors, and gene redundancy in resolving this apparent paradox.

Speech prognosis and need of pharyngeal flap for non syndromic vs syndromic Pierre Robin Sequence

BACKGROUND: The aim of this retrospective study was to evaluate speech outcome and need of a pharyngeal flap in children born with nonsyndromic Pierre Robin Sequence (nsPRS) vs syndromic Pierre Robin Sequence (sPRS). METHODS: Pierre Robin Sequence was diagnosed when the triad microretrognathia, glossoptosis, and cleft palate were present. Children were classified at birth in 3 categories depending on respiratory and feeding problems. The Borel-Maisonny classification was used to score the velopharyngeal insufficiency. RESULTS: The study was based on 38 children followed from 1985 to 2006. For the 25 nsPRS, 9 (36%) pharyngeal flaps were performed with improvements of the phonatory score in the 3 categories. For the 13 sPRS, 3 (23%) pharyngeal flaps were performed with an improvement of the phonatory scores in the 3 children. There was no statistical difference between the nsPRS and sPRS groups (P = .3) even if we compared the children in the 3 categories (P = .2). CONCLUSIONS: Children born with nsPRS did not have a better prognosis of speech outcome than children born with sPRS. Respiratory and feeding problems at birth did not seem to be correlated with speech outcome. This is important when informing parents on the prognosis of long-term therapy

La réhabilitation psychosociale a l'aube du XXIème siècle. I: Principes, population cible et pathologie en cause

The relatively recent development of the psychosocial rehabilitation has its origins mainly in the progress of modern psychopharmacology, the assertion of the rights of the patients and the result of the studies showing that the evolution of persons suffering from severe and persistent mental illnesses can prove to be positive in many cases. In spite of the heterogeneity of the experiences and of the theoretical references, the core principles of the psychosocial rehabilitation imposed themselves. These principles can be classified according to three levels, that of relational ethics, that of the method of intervention and that of the institutional device. A recent study showed that 2.4@1000 of the general adult population of the Canton of Vaud live in sociotherapeutic and rehabilitation accommodations. In this sample, there is a important percentage of relatively young persons (55.3% are under 40). In institutional accommodation there is a majority of patients suffering from major personality disorders and addiction (40.6%), followed by psychotic disorders (37.2%), persistent mood disorders (12.3%), neurotic disorders (6.6%) and psycho-organic disorders (3.3%). In home based rehabilitation, the ratio of patients with psychotic disorders is more important (53.1%). This difference would indicate that people with schizophrenia would have a better social outcome than personality disorders with addiction

Umbilical venous concentrations of estradiol in infants with early-onset neonatal sepsis and chorioamnionitis.

Objective: Fetuses are exposed to high concentrations of estradiol due to placental production. Experimental data suggest that estradiol is an important modulator of the immune response. However, the role of estradiol in the pathogenesis of early-onset neonatal sepsis (EOS) is unknown. The purpose of this pilot study was to determine estradiol levels in umbilical venous blood of newborns with EOS or chorioamnionitis exposure. Methods: Estradiol concentrations were measured by enzyme immunoassay in 37 newborns with EOS, 37 newborns with chorioamnionitis and 37 controls matched for gestational age and gender. Results: Estradiol levels correlated with gestational age, birth weight, gender and mode of delivery (p < 0.05). Multivariate analysis revealed higher estradiol levels in the EOS than in the chorioamnionitis group (odds ratio 8.43, 95% CI 1.63-43.45, p = 0.01) with the highest levels in patients with proven bacteraemia (p = 0.02). No difference was found between the EOS and the control group. Exploratory analysis showed an association between lower estradiol levels and a longer duration of mechanical ventilation (n = 28, p = 0.02). Conclusions: Umbilical venous estradiol levels were similar in EOS compared to controls. Further investigation is needed to evaluate whether high estradiol levels in infants with chorioamnionitis increases the risk of developing EOS.

How important is the intensive margin of labor adjustment?

Using new quarterly data for hours worked in OECD countries, Ohanian and Raffo (2011) argue that in many OECD countries, particularly in Europe, hours per worker are quantitatively important as an intensive margin of labor adjustment, possibly because labor market frictions are higher than in the US. I argue that this conclusion is not supported by the data. Using the same data on hours worked, I find evidence that labor market frictions are higher in Europe than in the US, like Ohanian and Raffo, but also that these frictions seem to affect the intensive margin at least as much as the extensive margin of labor adjustment.

One person in the battlefield is not a warrior: Self-construal, perceived ability to make a difference, and socially responsible behavior

We suggest that cultivating an individual's connectedness to others promotes sociallyresponsible behavior both directly and indirectly through increased perceived abilityto make a difference. Individuals whose interdependent self is more prominent feel theyhave more of an impact on larger scale societal outcomes and, therefore, engage more insocially responsible behaviors than do individuals whose independent self is moreprominent. We test these hypotheses in two experiments in which participants makefinancial contributions or exert an effort for a social cause. In a survey, we find thatperceived effectiveness mediates the effect of self-construal on socially responsibleconsumption.