The chapters of this work lie at the intersection between classical choice theory and experimental data on decision making. In chapter 21 study necessary and sufficient conditions for a choice function to be rationalized in the following sense: there exists a complete asymmetric relation T (a tournament) such that, for each feasible (finite) set, the choice set coincides with the uncovered set of T restricted to that feasible set. This notion of 'maximization' may offer testable restrictions on observable choice behavior. In chapter 3 Mariotti and I give a group revealed preference interpretation to the concept of uncovered set, and we provide a characterization of uncovered bargaining solutions of a Pareto-consistent tournament. In chapter 41 study the rationalizability of reason-based choice correspondences axiomatically. A reason-based choice correspondence rationalizes choice behaviour in terms of a two stage choice procedure. Given a feasible set S, the individual eliminates in the first step all of the dominated alternatives according to her fixed (not necessarily complete) strict preference relation. In the second step, she first constructs for each maximal alternative identified in the first step its lower contour set, and then she eliminates from the maximal set all of those alternatives so that the following justification holds: there exists another maximal alternative whose lower contour set strictly contains that of another maximal alternative. This procedural model captures the basic idea behind the experimental finding known as "attraction effect". Finally, in chapter 51 build a connection between the behavioral property expressed by the weak axiom of revealed non-inferiority and a new weak notion of rationality. This notion is weaker than that characterized by the weak axiom of revealed preference (WARP).

This PhD thesis applies the time-series concepts of unit-roots and cointegration to nonstationary panel data. The first three chapters set the scene for what follows and together are the first methodological core of the thesis, on nonstationary panel data estimation and testing. In chapter 1 we consider the established panel unit root tests of Levin, Lin and Chu (2002) and Im, Pesaran and Shin (2003) and also Pesaran (2005) for cross-sectional dependence, with a panel of 20 OECD inflation rates. In chapter 2 we consider the established panel cointegration tests of Kao (1999), Pedroni (1999) and Larsson, Lyhagen and Lothgren (200 1) with a panel of 25 OECD exchange rates to test for long run PPP, again including cross-sectional dependence. In chapter 3 a more original contribution is given. We conduct an extensive empirical study of the long run determinants of consumption expenditure for a panel of 20 OECD countries. A panel data cointegrating regression is estimated using the panel DOLS and FMOLS estimators of Kao and Chiang (2000) and Pedroni (2000,2001). Using Bai and Kao (2005) we again consider cross-sectional dependence. The second methodological core is the statistical inference of nonstationary panel data, in the last two chapters. In chapter 4 is another original contribution using the bootstrap with nonstationary panel data. New bootstrap algorithms are presented for the panel DOLS estimators mentioned above and also the group-mean estimator of Pesaran and Smith (1995). In our last original contribution, in chapter 5, we consider the asymptotic properties of nonstationary panel data estimators. The asymptotic normality and asymptotic consistency of our panel FMOLS, DOLS and OLS estimators are proved for the simple case of the panel cointegrating regression with a constant intercept and trend. The new sequential limit asymptotic theory of Phillips and Moon (1999) is highlighted.

This thesis contains three studies on the economics of entry into marriage; a life event that has been shown to have significant implications for the well-being (economic and otherwise) of men, women and their children. The first study examines the effect of family background on the timing of first marriage of 7,853 individuals born in 1970 in Great Britain. Hazard model analysis reveals that high levels of parental resources serve to delay entry into marriage for both males and females, although this effect fades as a young adult ages. Consistent with theories of “resource dilution”, a greater number of siblings present in the household during adolescence is associated with early marriage for both sexes. It is also found that the presence of a younger sibling in the household hastens marriage for males, while the presence of a younger brother is associated with early marriage for both sexes. The second study investigates how changes in abortion policy in Eastern Europe during the late-eighties and early-nineties may have affected female first-marriage rates. Previous studies have suggested that more liberal abortion laws should lead to a decrease in marriage rates among young women as ‘shotgun weddings’ are no longer necessary. Empirical evidence from the United States lends support to that hypothesis. This study presents an alternative theory of abortion access and marriage based on the cost of search that suggests that more liberal abortion laws may actually promote young marriage. An empirical examination of marriage data from Eastern Europe shows that countries that liberalized their abortion laws during the late-eighties and early-nineties saw an increase in marriage rates among non-teenage women. The third study uses a unique and comprehensive panel of 2441 U.S. counties spanning from 1970 to 1999 to examine the relationship between the cost of owner-occupied housing and entry into marriage. It is found that the burden of housing costs negatively affects the marriage rate. Further, it is reported that the greater the difference between the annual cost of owning a house and the annual cost of renting, the lower the marriage rate. These are important findings since they imply that government policies designed to reduce the cost of housing (such as tax advantages to owner-occupiers) have the potential to encourage entry into marriage.

This thesis contains three essays on the macroeconomics of inequality. The first chapter analyses the effects of minimum wages on inequality. While there has been intense debate in the empirical literature about the effects of minimum wages on inequality in the US, its general equilibrium effects have been given little attention. In order to quantify the full effects of a decreasing minimum wage on inequality, I build a dynamic general equilibrium model, based on a two-sector growth model where the supply of high-skilled workers and the direction of technical change are endogenous. I find that a permanent reduction in the minimum wage leads to an expansion of low-skilled employment, which increases the incentives to acquire skills, thus changing the composition and size of high-skilled employment. These permanent changes in the supply of labour alter the investment ow into R&D, thereby decreasing the skill-bias of technology. The reduction in the minimum wage has spill-over effects on the entire distribution, affecting upper-tail inequality. Through a calibration exercise, I find that a 30 percent reduction in the real value of the minimum wage, as in the early 1980s, accounts for 15 percent of the subsequent rise in the skill premium, 18.5 percent of the increase in overall inequality, 45 percent of the increase in inequality in the bottom half, and 7 percent of the rise in inequality at the top half of the wage distribution. In the second chapter, I construct a model, where the supply of skills and the skill premium can increase jointly, as occurred in the US over the past few decades. I high- light the importance of the joint determination of the direction of technical change and skill formation. There is a positive feedback between these two variables. Technological progress is driven by profit oriented R&D firms, where profits are increasing in the amount of labour that is able to use these technologies. Therefore, when the supply of high-skilled 3labour increases, technology endogenously becomes more skill-biased. A more skill-biased technology leads to a higher skill premium, which increases the incentives to acquire educa- tion, and the supply of high-skilled labour rises. During the transition to the steady state, both quantities increase simultaneously. I map the dependence of the transition path of the economy on the initial skill supply and relative technology between the high- and the low-skilled sector. I find that, contrary to the previous literature, the skill premium and the skill supply can increase jointly even if the bias of technology is weak. In the third chapter, I relate the degree of progressivity of the income tax scheme to the prevailing income inequality in the society. I find that, consistent with the data, more unequal societies implement more progressive income tax systems. I build a model of political coalition formation, where different income groups have to agree on a tax scheme to finance the public good. I show that, the greater income inequality is, i.e. the further away the rich are from the rest of the population, the less able they are to credibly commit to participating in a coalition. Therefore, as income inequality rises, the rich are increasingly excluded from the design of the income tax scheme. Consequently, the rich bear a larger fraction of the public good, and the tax system becomes more progressive.

In this dissertation we study the indifference buyer's price and the indifference seller's price of an uncertainty averse decision-maker and the characterization of a decision maker's attitudes toward uncertainty. In the first part of the dissertation we study the properties fulfilled by the indifference buyer's price and by the indifference seller's price of an uncer- tainty averse decision-maker. We find that the indifference buyer's price is a quasiconvex risk measure and that the indifference seller's price is a cash-additive convex risk measure. We identify the acceptance family of the indifference buyer's price as well as the acceptance set of the indifference seller's price. We characterize the dual representations of the indifference buyer's price and of the indifference seller's price both in terms of probabil- ity charges and in terms of probability measures. In the second part of the dissertation we study the characterization of a decision-maker's attitudes toward uncertainty in terms of the indifference buyer's price and of the indifference seller's price. We find that a decision- maker is more uncertainty averse than another if and only if her indifference buyer's price and her indifference seller's price are larger than for the other. We find that a decision-maker is increasingly (respectively, decreasingly, con- stantly) uncertainty averse if and only if her indifference buyer's price and her indifference seller's price are increasing (respectively, decreasing, con- stant) functions of her constant initial wealth. In the last part of the dissertation we further develop the characterization of increasing, decreasing, and constant uncertainty aversion and we derive a technical condition that allows to immediately verify whether an uncer- tainty averse representation of preferences exhibits increasing, decreasing, or constant uncertainty aversion. We find that this technical condition allows 6to classify a large class of uncertainty averse representations of preferences into increasingly, decreasingly, and constantly uncertainty averse.

Econometric modelling and statistical inference are considerably complicated by the possibility of correlation across data data recorded at different locations in space. A major branch of the spatial econometrics literature has focused on testing the null hypothesis of spatial independence in Spatial Autoregressions (SAR) and the asymptotic properties of standard test statistics have been widely considered. However, finite sample properties of such tests have received relatively little consideration. Indeed, spatial datasets are likely to be small or moderately-sized and thus the derivation of finite sample corrections appears to be a crucially important task in order to obtain reliable tests. In this project we consider finite sample corrections based on formal Edgeworth expansions for the cumulative distribution function of some relevant test statistics. In Chapter 1 we provide the background for the results derived in this thesis. Specifically, we describe SAR models together with some established results in first order asymptotic theory for tests for independence in such models and give a brief account on Edgeworth expansions. In Chapters 2 and 3 we present refined procedures for testing nullity of the spatial parameter in pure SAR based on ordinary least squares and Gaussian maximum likelihood, respectively. In both cases, the Edgeworth-corrected tests are compared with those obtained by a bootstrap procedure, which is supposed to have similar properties. The practical performance of new tests is assessed with Monte Carlo simulations and two empirical examples. In Chapter 4 we propose finite sample corrections for Lagrange Multiplier statistics, which are computationally particularly convenient as the estimation of the spatial parameter is not required. Monte Carlo simulations and the numerical implementation of Imhof's procedure confirm that the corrected tests outperform standard ones. In Chapter 5 the slightly more general model known as \mixed" SAR is considered. We derive suitable finite sample corrections for standard tests when the parameters are estimated by ordinary least squares and instrumental variables. A Monte Carlo study again confirms that the new tests outperform ones based on the central limit theorem approximation in small and moderately-sized samples.

This thesis is a systematic attempt to investigate two conjectures about the distribution of company rates of profit: that it should be log-normal (Gibrat 1931), and that it should be gamma distributed (Farjoun and Machover 1983). A large set of company accounts data is analysed, and partial support found for Gibrat and for a generalised version of Farjoun and Machover. The analysis includes a demonstration of different empirical distributions for different profit rate measures, a demonstration of power law tails in all measures of the profit rate, and a demonstration of size effects (differences in tail weights) in financial ratios. Annual variation in the overall skewness and kurtosis of profit rate distributions is shown to be dominated by variation in the power law tails. <i>L</i>-moments, a recent innovation in robust methods to deal with extreme values, are used in conjunction with a size-weighted sampling scheme to identify possible models for distributions of the profit rate at the capital level. Farjoun and Machover derive their hypothesis from a particular conception of the process of capitalist competition. A rival conception, that of Glick (1985), is tested using company accounts data and shown to be vulnerable to criticism concerning the scope of its data set, the test statistic employed, and its choice of profit rate measure. More fundamentally, it is also dependent on doubtful premises about the within-industry distribution of profit rates, as L-moment analysis demonstrates.

This research aims at developing and extending the theoretical and empirical literature on the extent of government sector involvement in the economy. It is primarily concerned to analyse the causes of the generally increasing size of the government sector in developed market economies. Despite the importance of this topic in the field of political economy, the literature review suggests that there is no single core theory of the size of government in the economy, only various fragmented theoretical explanations. In an attempt to bridge this analytical gap in the existing knowledge, this research offers a simple integrative theoretical framework. Within that framework, this research gathers and empirically tests the most relevant theories in this field. To that end, it makes use of data for developed market economies in the period from 1970 to 2008. The obtained results indicate that national income, a country‟s degree of modernisation, trade and financial openness, relative prices of government and private goods and government sector employment play an important role in explaining the size of government in developed market economies. In addition, this research contributes to the existing empirical literature by examining the evolution of long, historical time-series of government expenditures for the four developed market economies for which this data is available (the US, the UK, Italy and Sweden). Contrary to conventional wisdom, statistical examination of the data suggests that the major change in the underlying growth rate of government expenditures occurred around the turn of the 20th century. By contributing to a better understanding of the long-run determinants of the size of government in the economy, this research offers a basis for relevant policy proposals and also informs debate on the appropriate size and role of the public sector in a mixed economy.

Ever since the Peasant's Revolt in 1379/ collection of our taxes has been unpopular. In particular when the taxes are viewed as unfair the population have reacted in significant and even violent ways. For example the Hearth Tax of 1662/ Window Tax of 1747 and the Poll tax of the 1990's have experienced public rejection of these levies. Additionally there has been a major growth in tax avoidance in the last 60 years. All of this may indicate a single ontology of taxation; one where tax is disliked and avoided. However the work of Buchanan (1994) suggested there are alternative ways of viewing taxation by identifying four alternative paradigms of taxation. This research recognises the work of Buchanan (1994) but challenges whether his alternatives are paradigms; other researchers suggest there are factors such as age, gender and background that can influence our view of taxation. If that is true then Buchanan's (1994) work must be interpreted as four alternative perceptions of taxation; that is taxation does not have a single ontology. Based upon primary and secondary research this thesis clearly identifies the factors that can influence our view, perception, of taxation. Contrary to the conclusions of Auderbach (1999) this research considers a matrix of factors rather than adopting Auderbach's view that tax policy is endogenous and should not try to explain taxes from a wide range of factors. This matrix of factors is concluded in the Tax Perception Push-Pull Model which identifies a range of influences and in categorising the factors it identifies the relative strength or importance of the factors. The model concept is tested against the tax changes in,traduced in the UK Budget statement of 2008 and shows there is a balance of push and pull factors, concluding that the population's overall view of taxation should not change.

This PhD dissertation studies the effects of some types of asymmetries in the context of international markets. It pursues two main targets: the first one is to implement an efficiency analysis of different degrees of production factors integration; the second one is to shed further light on the determinants of Pricing-to-Market in order to close the gap on the Purchasing Power Parity. The first part of the work aims at evaluating whether a full integration of countries or regions is always welfare-improving or not. In case it is not, it tries to establish in which cases and to which extent the mobility of production factors should be constrained in order to yield welfare-improvements. Finally, it turns to the point of view of individual markets, by looking at which one gains and which one loses after integration with other markets. Thus, a static general equilibrium framework is provided. It features (many) heterogeneous monopolistic firms, that are aggregated according to a nested CES function. Two different theoretical scenarios are developed: in the first one, all the production factors in the model (i.e. capital and labour) are assumed to be free mobile across markets; in the second one, one of the inputs, namely labour, is restricted at the individual market level. It turns out that, as long as cross-market demand elasticities are homogeneous, the integrated economy always produces an efficient outcome. However, if markups differ across markets, then full integration yields an inefficient level of production due to misallocation of production factors. In this case, a welfare-superior result can be reached for some exogenous restrictions of labour mobility. The second part of the thesis addresses the Purchasing Power Parity puzzle by focusing on the determinants of Pricing-to-Market. Thus, in order to understand the reasons why firms price their goods differently across national borders, the model by Atkeson and Burstein (American Economic Review, 2008) is directly extended in two different ways. More specifically, the original framework explains Pricing-to-Market through both imperfect competition with variable markups and international trade costs. However, it is not able to completely match the actual extent of Pricing-to-Market reported in some countries and, particularly, in the United States; therefore, the main goal is to improve that result. The first extension developed consists in adding fixed costs of production and heterogeneity in country level demand preferences to the reference setting. Evidence of cross-country asymmetry in total household expenditure shares on different goods is provided such as of home bias. The second extension, instead, consists in including heterogeneity in international trade costs. Even in this case, evidence of asymmetry in costs to export is shown. According to numerical results, both the extensions are able to improve the reference work: the extent of Pricing-to-Market predicted is closer to the actual value; furthermore, both the ratio of exports to gross output in manufacturing sectors and the share of manufacturing plants that export in the US market are matched.