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This thesis analyses non cooperative solutions with consumption e.xternalities in a partial equilibrium setting. Two non cooperative solutions are examined: the individual utility maximising response to the consumption choices of the other individuals (the Marshallian Nash equilibrium) and the individual expenditure minimiqing response· to the quantity consumed by the other agents (the compensated Nash equilibrium). Three chapters focus on the positive economics of the Marshallian Nash equilibrium with original theoretical and empirical insights. One chapter suggests policy corrections to have an optimal compensated Nash equilibrium. The effect ofconsumption externalities on the comparative. statics of a unique Marshallian Nash equilibrium is firstly examined. We analyse under which conditions the intensity of the externality changes the nature of the good. We find testable restrictions for this equilibrium solution under different assumptions on the number of individuals, number of externality inducing goods, functional forms of the externality effect. An empirical estimate of this non cooperative solution is then offered using consumer demand theory and a large data set (ten cross sections from the Family Expenditure Surveys (FES) 1991-2000). There is evidence of negative interdependent consumption externalities in household petrol budget shares. Next there is a more precise microfoundation of multiple equilibrium theory with consumption externalities. The slope and the curvature of the reaction function are linked to marginal utility properties. Vle find conditions that induce the individual to stay out of the market. The stability properties of corner solution Nash equilibria are analysed. We find counterintuitive examples on the comparative statics of these solutions. In the last original chapter, simple rules for an optimal tompensated Nash equilibria with no spillover externalities are considered. For tliis case, Lindahl prices are required. We show the condit~ ons under which piecemeal policies are possible. Testable restrictions for this compensated Nash equilibrium conclude the thesis.

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A model for large portfolio credit risk is developed by using results on the asymptotic behaviour of stochastic networks. We analyse some of the charac- teristics of the model by studying the infinitesimal generator of the portfolio default process using some results of the theory of Piecewise Deterministic processes (PDPs). An efficient pricing technique is proposed using a newly- 1ntroduced quadrature algorithm using a decomposition of the sample space similar to the canonical Poisson space decomposition. Accurate calibration to iTraxx spreads is demonstrated.

We use an evolutionary psychology framework and hypothesize that men and women have heterogeneous economic preferences. In particular, we propose' that men are financially less risk averse than women. We test this supposition by calibrating the risk aversion coefficient for both sexes, using a Consumption Capital Asset Pricing Model and panel data on consumption. Our results. offer support to our hypothesis. Also, we assert that men prefer status more than women do. To assess the validity of this proposition we conduct direct tests on the structure of preferences, using panel data on life-satisfaction. The results from this exercise verify our hypothesis. We further investigate how gender differences in the preferences for status influence labour supply. To this end, we develop a static labour supply model with interdependent preferences and test for sex differences. Our results in the cross section are largely supportive of our model. However, once we control for fixed individual heterogeneity using panel data. we find no evidence of gender differences on labour supply.

This thesis is composed of three chapters, which can be read independently. In the …first chapter we explore distributive justice and perception of fairness using survey data from freshmen and senior students of economics and sociology. We analyse the impact of context and education on their preferences over a hypothetical distribution of resources between individuals which presents a trade off between efficiency and equality. With context giving minimal information, economics students are less likely to favour equality; studying economics in‡fluences the preferences of the subjects, increasing this difference. However, when the same problem is inserted into a meaningful context, the difference disappears. Four distribution mechanisms are analysed: egalitarianism, maximin, utilitarianism and utilitarianism with a fl‡oor constraint. The second chapter considers a public good game with heterogeneous endowments and incomplete information affected by extreme free-riding. We overcome this problem through the implementation of a contest in which several prizes may be awarded. We identify a monotone equilibrium, in which the contribution is strictly increasing in the endowment. We prove that it is optimal for the social planner to set the last prize equal to zero, but otherwise total expected contribution is invariant to the prize structure. Finally, we show that private provision via a contest Pareto-dominates public provision and is higher than the total contribution raised through a lottery. The third chapter investigates fund-raising mechanisms based on a prize as a way to overcome free riding in the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally the performance of a lottery, an all-pay auction and a benchmark voluntary contribution mechanism. We …find that prize-based mechanisms perform better than voluntary contribution in terms of public good provision after accounting for the cost of the prize. Comparing the prize-based mechanisms, total contributions are significantly higher in the lottery than in the all-pay auction. Focusing on individual income types, the lottery outperforms voluntary contributions and the all-pay auction throughout the income distribution.

This thesis is a study of stock volatility adopting two factor volatility models for large datasets: the orthogonal GARCH model and the stochastic volatility factor model. An application is made to the constituent stocks of five Asian indexes. Factor analysis and volatility forecasting exercise are carried out. Chapter 1 is an empirical application of the orthogonal GARCH model to Asian stock returns. Correlation analysis, eigenvalue and eigenvector analysis and several diagnostic tests are carried out. Our results show that using large number of principal components cannot guarantee an improvement in capturing dynamics. Moreover, GARCH(l,l) is the appropriate specification for the principal components of stock returns of some datasets. An empirical example of how GARCH analysis of all series in the entire dataset can be summarised by a univariate GARCH analysis of the first principal component is also provided. Chapter 2 is a factor analysis using stochastic volatility factor models. In contrast to the first part of the study, common factors are estimated from large datasets of Asian stock volatilities via principal components. Correlation analysis of stock volatilities is performed. Examinations of the dynamics of factor estimates and their explanatory power are also carried out. Our results 3 confirm that large dataset with many cross-sectional series from the same category may not always be desirable for factor analysis. Evidence of long memory is found in the first principal component of some datasets but not all of them. Chapter 3 is a volatility forecasting exercise. In-sample analysis is implemented using the stochastic volatility factor models and the orthogonal GARCH model. Moreover, we propose an extension of a local-factor model to a multi-factor model. Testing of factor significance is scrutinised. A comparison of forecasting performance shows that the stochastic volatility factor models outperform the orthogonal GARCH model in forecasting Asian volatilities.

The thesis examines the changes in the labour market behaviour and welfare participation of women in the UK. Over recent decades the UK has seen a dramatic rise in women's labour force participation. This growth led to remarkable shifts in the families employment structure. The UK has seen a rapid decline in the male breadwinner model of employment due to rising dual-earner and single-adult households over the years. In spite of this, the employment rate of single mothers is one of the lowest amongst other mothers and other OECD countries. While Chapter 1 and Chapter 2 evaluate two of the largest welfare transfers in the UK in search for potential explanations for it, Chapter 3 traces the factors behind the rise in dual-earner households. More precisely Chapter 1 investigates the impact of the automatic withdrawal of Income Support on labour supply decisions of single mothers with no qualifications. Consistent with a simple labour supply model, a substantial rise in mothers employment rate and an increase in job search effort are reported. Indeed 20% of single mothers who were initially on Income Support enter work following the benefit withdrawal. Chapter 2 studies the potential causal relationship between the benefit withdrawal and the availability of disability transfers. It is observed that 25% of single mothers with no qualifications who lose Income Support transit into disability benefits rather than work, in line with the predictions of a model of benefits choice. Finally, Chapter 3 uses a decomposition exercise à-la-DiNardo-Fortin-Lemieux (1996) to pin down the rise in dual-earner households to changes in: (1) returns to female characteristics conditional on female labour force participation; (2) returns to male characteristics; (3) assortative mating; and (4) female characteristics. Female labour force participation appears to be the primary factor while assortative mating plays a modest role.

The degree of dependence inherent in a dataset, either in the time series domain or in multivariate analysis, commonly gives rise to two distinct types of processes: stationary and non-stationary (unit root). This thesis focuses on detecting the underlying degree of dependence in a certain dataset of unit (1; T) or higher (N; T) dimension. The rst part of the thesis aims at identifying the intrinsic strength of structure in a large dimensional setup. It is known that all informa- tion needed for this purpose is contained in the column-sum norm of the variance-covariance matrix of the dataset. This approaches in nity at rate N , 0 < 1. The strength of structure can then be determined by the value of . On this basis, a summary statistic is constructed as a means of quantifying this parameter . The resulting non-linear least squares estimator is consistent for relatively small N=T ratios. The accuracy of the statistic is further checked by use of a bootstrap procedure. An application to three major stock market indices is also incorporated. The second part of the thesis introduces alternative approaches to testing the hypothesis that a certain time series contains a unit root. Contrary to traditional unit root tests that assume speci c forms of de- 4 pendence in the errors of their stationary alternatives, it is argued that properties of partial sums can be used to provide limiting distributions for a wide range of stationary processes, with short or long memory. A rescaled variance type test making use of partial sums provides a simpler procedure for assessing the existence of a unit root in a time series with reasonable size and power. A further approach examined entails making use of the properties of the periodogram at low frequen- cies. Again a unit root/stationarity test based on this methodology is simple to implement and gives satisfactory results for size and power.