Melissa Jaud, Madina Kukenova and Martin Strieborny add to
the finance and international trade literature in “Finance, Comparative Advantage, and Resource Allocation”, a literature close to my heart as my job market paper contributed to this literature
in its early days. Specifically, using disaggregated product-level data from 71 countries exporting to the USA, the authors show that exporters exit the US market sooner if their products are not supported by the exporting country’s comparative advantage,
as revealed through the distance between revealed factor intensity of the export good and the exporting country’s factor endowments. This pattern is stronger when the exporting country has a well-developed banking system. These results confirm
the disciplining role that competition in the product market can play, in interaction with market discipline exercised by lenders.
Kathryn Dewenter, Xi Han and Jennifer Koski assess the effect of euro conversion on competition across stock
exchanges within the Eurozone in “Who Wins When Exchanges Compete? Evidence from Competition
after Euro Conversion”. They find that in the year following euro conversion bid-ask spreads across European exchanges fall an average of almost 9% while turnover (defined as trading volume scaled by shares outstanding) rises over 30%, so clear aggregate
gains, to be explained by trading with only one currency! However, there are winners and loser across the different exchanges; specifically, Milan, Frankfurt, Paris and London are the winners with significant increases in turnover, while Brussels and Madrid
are the biggest losers with significant declines. They explain these differential effects with different composition of the listed firm population. Interestingly, the euro conversion and consequent increase in competition did not result in a winner takes all
outcome, in spite of the network externalities for capital markets.