Human Capital, the Structure of Production, and Growth

Recent decisions by the Spanish national competition authority (TDC) mandate payment systems to include only two costs when setting their domestic multilateral interchange fees (MIF): a fixed processing cost and a variable cost for the risk of fraud. This artificial lowering of MIFs will not lower consumer prices, because of uncompetitive retailing; but it will however lead to higher cardholders fees and, likely, new prices for point of sale terminals, delaying the development of the immature Spanish card market. Also, to the extent that increased cardholders fees do not offset the fall in MIFs revenue, the task of issuing new cards will be underpaid relatively to the task of acquiring new merchants, causing an imbalance between the two sides of the networks. Moreover, the pricing scheme arising from the decisions will cause unbundling and underprovision of those services whose costs are excluded. Indeed, the payment guarantee and the free funding period will tend to be removed from the package of services currently provided, to be either provided by third parties, by issuers for a separate fee, or not provided at all, especially to smaller and medium-sized merchants. Transaction services will also suffer the consequences that the TDC precludes pricing them in variable terms.

Growth, Democracy, and Civil War

Does economic growth affect the likelihood of civil war? Answering this question requires dealing with reverse causation. Our approach exploits that international commodity prices have a significant effect on the income growth of Sub-Saharan African countries. We show that lower income growth makes civil war more likely in non-democracies. This effect is significantly weaker in democracies; as a result, we find no link between growth and civil war in these countries. Our reducedform results also indicate that lower international commodity price growth has no effect on civil war in democracies, but raises the likelihood of civil war incidence and onset in nondemocracies.

Productivity Growth during the English Industrial Revolution: A Dual Approach

This paper presents new estimates of total factor productivity growth in Britain for the period 1770-1860. We use a dual technique recently popularized by Hsieh (1999), and argue that the estimates we derive from factor prices are of similar quality to quantity-based calculations. Our results provide further evidence, derived from this independent set of sources, that productivity growth during the British Industrial Revolution was relatively slow. During the years 1770-1800, TFP growth was close to zero, according to our estimates. The period 1800-1830 experienced an acceleration of productivity growth. The Crafts-Harley view of the Industrial Revolution is thus reinforced. We also consider alternative explanations of slow productivity growth, and reject the interpretation that focuses on the introduction of steam as a general purpose technology.

Financial Development, Financial Fragility, and Growth

This paper studies the apparent contradiction between two strands of the literature on the effects of financial intermediation on economic activity. On the one hand, the empirical growth literature finds a positive effect of financial depth as measured by, for instance, private domestic credit and liquid liabilities (e.g., Levine, Loayza, and Beck 2000). On the other hand, the banking and currency crisis literature finds that monetary aggregates, such as domestic credit, are among the best predictors of crises and their related economic downturns (e.g., Kaminski and Reinhart 1999). The paper accounts for these contrasting effects based on the distinction between the short- and long-run impacts of financial intermediation. Working with a panel of cross-country and time-series observations, the paper estimates an encompassing model of short- and long-run effects using the Pooled Mean Group estimator developed by Pesaran, Shin, and Smith (1999). The conclusion from this analysis is that a positive long-run relationship between financial intermediation and output growth co-exists with a, mostly, negative short-run relationship. The paper further develops an explanation for these contrasting effects by relating them to recent theoretical models, by linking the estimated short-run effects to measures of financial fragility (namely, banking crises and financial volatility), and by jointly analyzing the effects of financial depth and fragility in classic panel growth regressions.

Firm-Specific Investment, Sticky Prices, and the Taylor Principle

According to the Taylor principle a central bank should adjust the nominal interest rate by more than one-for-one in response to changes in current inflation. Most of the existing literature supports the view that by following this simple recommendation a central bank can avoid being a source of unnecessary fluctuations in economic activity. The present paper shows that this conclusion is not robust with respect to the modelling of capital accumulation. We use our insights to discuss the desirability of alternative interest rate rules. Our results suggest a reinterpretation of monetary policy under Volcker and Greenspan: The empirically plausible characterization of monetary policy can explain the stabilization of macroeconomic outcomes observed in the early eighties for the US economy. The Taylor principle in itself cannot.

What do women do? World population growth and fertility patterns, 1960-2000

In this paper we attempt to describe the general picture reasons behind the world population explosion during the 20th century. In general we comment that if, according to some, at the end of the 20th century there were too many people, this was has a consequence of scientific innovation, circulation of information, and economic growth, leading to a dramatic improvement in life expectancies. Nevertheless, a crucial variable shaping differences in demographic growth is fertility. In this paper we identify as important exogenous variables affecting fertility female education levels, infant mortality, and racial identity and diversity. It is estimated that three additional years of schooling for mothers leads on average (at the world level ) to one child less per couple. Even if we can identify a worldwide trend towards convergence in demographic trends, the African case needs to be given more attention, not only because of its different demographic patterns, but also because this is the continent where the worldwide movement towards a higher quality of life has not yet been achieved for an important share of the world's population.

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.

Earthquake impacts in old-growth Nothofagus forests in New Zealand

Six stands located on different land forms in mixed old-growth Nothofagus forests in the Matiri Valley (northwest of South Island. New Zealand) were sampled to examine the effects of two recent large earthquakes on tree establishment and tree-ring growth, and how these varied across land forms. 50 trees were cor ed in each stand to determine age structure and the cores were cross-dated to precisely date unusual periods of radial growth. The 1968 earthquake (M = 7.1, epicentre 35 km from the study area) had no discernible impact on the sampled stands. The impact of the 1929 earthquake (M = 7.7, epicentre 20 kin from the study area) varied between stands, depending on whether or not they had been damaged by soil or rock movement. In all stands, the age structures showed a pulse of N. fusca establishment following the 1929 earthquake, with this species dominating establishment in large gaps created by landslides. Smaller gaps, created by branch or tree death, were closed by both N. fusca and N. menziesii. The long period of releases (1929-1945) indicates that direct earthquake damage was not the only cause of tree death, and that many trees died subsequently most likely of pathogen attack or a drought in the early 1930s. The impacts of the 1929 earthquake are compared to a storm in 1905 and a drought in 1974-1978 which also affected forests in the region. Our results confirm that earthquakes are an important factor driving forest dynamics in this tectonically active region, and that the diversity of earthquake impacts is a major source of heterogeneity in forest structure and regeneration.

On Globalization and the Growth of Governments

This paper investigates the relationship between trade openness and the size of government, both theoretically and empirically. We show that openness can increase the size of governments through two channels: (1) a terms of trade externality, whereby trade lowers the domestic cost of taxation and (2) the demand for insurance, whereby trade raises risk and public transfers. We provide a unified framework for studying and testing these two mechanisms. First, we show how their relative strength depends on a key parameter, the elasticity of substitution between domestic and foreign goods. Second, while the terms of trade externality leads to inefficiently large governments, the increase in public spending due to the demand for insurance is optimal. We show that large volumes of trade may result in welfare losses if the terms of trade externality is strong enough while small volumes of trade are always beneficial. Third, we provide new evidence on the positive association between openness and the size of government and test whether it is consistent with the terms of trade externality or the demand for insurance. Our findings suggest that the positive relationship is remarkably robust and that the terms of trade externality may be the driving force behind it, thus raising warnings that globalization may have led to inefficiently large governments.

Enhanced visuospatial memory following intracerebroventricular administration of nerve growth factor

The present work assessed the effects of intracerebroventricular injections of rh recombined human nerve growth factor (rh NGF) (5 micrograms/2.5 microl) at postnatal days 12 and 13 upon the development of spatial learning capacities. The treated rats were trained at the age of 22 days to escape onto an invisible platform at a fixed position in space in a Morris navigation task. For half of the subjects, the training position was also cued, a procedure aimed at facilitating escape and at reducing attention to the distant spatial cues. Later, at the age of 6 months, all the rats were trained in a radial-arm maze task. Treatment effects were found in both immature and adult rats. The injection of NGF improved the performance in the Morris navigation task in both training conditions. There was a significant reduction in the escape latency and an increased bias toward the training platform quadrant during probe trials. The most consistent effect was the precocious development of an adult-like spatial memory. In the radial-arm maze, the NGF-treated rats made significantly fewer reentries than vehicle rats and this effect was particularly marked in the treated female rats. Taken together, these experiments reveal that the development and the maintenance of an accurate spatial representation are tightly related to the development of brain structures facilitated by the action of NGF. Moreover, these experiments demonstrate that an acute pharmacological treatment that leads to a transient modification in the choline acetyltransferase activity can induce a behavioral change long after the treatment.

Downsizing, Job Insecurity, and Firm Reputation

This paper studies how firms make layoff decisions in the presence of adverse shocks. In this uncertain environment, workers' expectations about their job security affect their on-the-job performance. This productivity effect on job insecurity forces firms to strike a balance between laying off redundant workers and maintaining survivors' commitment when deciding on the amount and timing of downsizing. This framework offers an explanation of conservative employment practices (such as zero or reduced layoffs) based on firms having private information about their future profits. High retention rates and wages can signal that the firm has a bright future, boosting workers' confidence. Moreover, the model provides clear predictions about when waves of downsizing will occur as opposed to one-time massive cuts.

Trade, Extent of the Market, and Economic Growth 1960-1996

We find that trade and domestic market size are robust determinants of economic growth over the 1960-1996 period when trade openness is measured as the US dollar value of imports and exports relative to GDP in PPP US$ ('real openness'). When trade openness is measured as the US dollar value of imports and exports relative to GDP in exchange rate US$ ('nominal openness') however, trade and the size of domestic markets are often non-robust determinants of growth. We argue that real openness is the more appropriate measure of trade and that our empirical results should be seen as evidence in favor of the extent-of-the-market hypothesis.

NF-kappaB transmits Eda A1/EdaR signalling to activate Shh and cyclin D1 expression, and controls post-initiation hair placode down growth.

A novel function of NF-kappaB in the development of most ectodermal appendages, including two types of murine pelage hair follicles, was detected in a mouse model with suppressed NF-kappaB activity (c(IkappaBalphaDeltaN)). However, the developmental processes regulated by NF-kappaB in hair follicles has remained unknown. Furthermore, the similarity between the phenotypes of c(IkappaBADeltaN) mice and mice deficient in Eda A1 (tabby) or its receptor EdaR (downless) raised the issue of whether in vivo NF-kappaB regulates or is regulated by these novel TNF family members. We now demonstrate that epidermal NF-kappaB activity is first observed in placodes of primary guard hair follicles at day E14.5, and that in vivo NF-kappaB signalling is activated downstream of Eda A1 and EdaR. Importantly, ectopic signals which activate NF-kappaB can also stimulate guard hair placode formation, suggesting a crucial role for NF-kappaB in placode development. In downless and c(IkappaBalphaDeltaN) mice, placodes start to develop, but rapidly abort in the absence of EdaR/NF-kappaB signalling. We show that NF-kappaB activation is essential for induction of Shh and cyclin D1 expression and subsequent placode down growth. However, cyclin D1 induction appears to be indirectly regulated by NF-kappaB, probably via Shh and Wnt. The strongly decreased number of hair follicles observed in c(IkappaBalphaDeltaN) mice compared with tabby mice, indicates that additional signals, such as TROY, must regulate NF-kappaB activity in specific hair follicle subtypes.

Adjustment to Target Capital, Finance, and Growth

Does financial development result in capital being reallocated more rapidly to industries where it is most productive? We argue that if this was the case, financially developed countries should see faster growth in industries with investment opportunities due to global demand and productivity shifts. Testing this cross-industry cross-country growth implication requires proxies for (latent) global industry investment opportunities. We show that tests relying only on data from specific (benchmark) countries may yield spurious evidence for or against the hypothesis. We therefore develop an alternative approach that combines benchmark-country proxies with a proxy that does not reflect opportunities specific to a country or level of financial development. Our empirical results yield clear support for the capital reallocation hypothesis.

Role of beta-1 integrin in tumor growth and dissemination

SUMMARY Cancer is one of the leading causes of disease-related mortality. In most cases, death is due to the spread of cells from the primary tumor to distant sites causing formation of metastases. To become tumorigenic, cells should acquire ability, including self-sufficiency in growth signals, insensitivity to anti-growth signals, resistance to apoptosis, sustained angiogenesis, limitless replicative potential and tissue invasion and metastasis. Tumor progression depends, in part on the relationship between tumor cells and host tissue stroma, characterized by changes of tumor cell adhesion to their microenvironment and activation of a variety of extracellular proteases that play a role in ECM degradation. integrins are adhesion proteins implicated in tumorigenesis. Their main function is to mediate cell adhesion to the ECM or to other cells and to create a link between the ECM and the cytoskeleton. Tumor cells like normal cells use integrins to attach to ECM, migrate into surrounding tissues and derive survival and growth signals. Integrin-dependent adhesion and migration are thought to play an important role in tumor dissemination. A strategy was designed to address the role of β1 integrin tumor growth and dissemination. Murine mammary carcinoma (TA3) cells were stably transfected with a soluble β1 integrin construct, which is anticipated to play a dominant negative role, being able to associate with different α-subunits expressed on the cell surface but unable to transduce signals to the nucleus. Results from studies based on soluble β1 integrin TA3 transfectants showed that 1) the integrin expression pattern at the cell surface changed with an induction of α2β1 and α5β1 heterodimers; 2) adhesion to collagens, especially collagen I was increased; 3) tumor dissemination after intrape-ritoneal injection in syngeneic mice was abolished and 4) local growth after orthotopic injection was maintained but delayed. Taken together, the data presented here suggest that β1 integrin plays a potentially important role in the regulation of tumor behavior. RESUME Le cancer est une des principales causes de mortalité suite à une maladie. Dans la plupart des cas, la mort est la conséquence de la dissémination de cellules, provenant de la tumeur primaire, dans des endroits distants et causant la formation de métastases. Afin de devenir cancéreuse, une cellule doit acquérir certaines capacités, telles qu'une auto-suffisance en facteurs de croissance, une insensibilité aux facteurs empêchant la croissance cellulaire, une résistance à l'apoptose, une angiogénèse soutenue, un potentiel de réplication illimité et une capacité à pénétrer dans les tissus et à former des colonies métastatiques. La progression d'une tumeur dépend, en partie, de la relation entre les cellules tumorales et les cellules tissulaires de l'hôte. Cette relation est caractérisée par des modifications des cellules tumorales quant à leur adhésion au microenvironnement et à l'activation de protéases qui permettent de dégrader la matrice extracellulaire. Les intégrines sont des protéines impliquées dans le développement tumoral. Leur fonction principale est de réguler l'adhésion des cellules à la matrice extracellulaire, ou à d'autres cellules, et de créer un lien entre cette matrice extracellulaire et le cytosquelette. Les cellules tumorales utilisent également les intégrines pour se lier à la matrice extracellulaire, pour migrer dans les tissus adjacents et pour induire des signaux de croissance et de survie. Ces événements d'adhésion et de migration, qui dépendent des intégrines, jouent un rôle primordial dans la dissémination des cellules cancéreuses. Une stratégie a été élaborée afin de définir le rôle de l'intégrine β1 durant la croissance et la dissémination des cellules tumorales. Des cellules provenant d'un carcinome de la glande mammaire (TA3) ont été transfectées de manière stable avec un vecteur contenant la séquence codante de la partie extracellulaire de l'intégrine β1. L'intégrine tronquée doit être capable de se lier aux sous-unités α exprimées à la surface de la cellule, mais doit être incapable de transmettre un signal à l'intérieur de la cellule. Les résultats obtenus avec les cellules TA3 transfectées contenant l'intégrine β1 soluble montrent que I) le répertoire d'expression des intégrines à la surface de la cellule a changé en faveur des hétérodimères α2β1 et α5β1; 2) l'adhésion aux collagènes, particulièrement au collagène de type I a augmenté; 3) la dissémination des cellules tumorales après une injection intrapéritonéale est empêchée; 4) la croissance tumorale après une injection orthotopique est conservée mais retardée. Ces résultats montrent que l'intégrine β1 joue un rôle primordial dans la régulation du comportement tumoral.