In recent time efforts are observed in re-evaluating the linkage between economic development and international migration. The thesis can be considered as an attempt to add something to those efforts. In this thesis we mainly analyse the effects of competition among the countries in international labour market and effects of migration on the research activities of firms. As appeared, these two issues so far have not received much attention of economic literature. We analyse the above mentioned two issues in chapters 4, 5 and 6 of the thesis. Before conducting the main analysis of the thesis, we have explored available data and literature on international migration in chapter 2 and 3. The two chapters were designed to give a global overview of international migration. In chapter 2 we have discussed about international migration using available statistics obtained from secondary sources. The data shows a steady but relatively slow growth rate of world migration since the World War Two. It has however been observed that migration of educated people has increased in recent times. We also have observed that remittances as a percentage of GDP and export are very high in many countries which confirm the importance of remittances. The data also shows that proximity of a wealthy country is an important determinant of international migration destination. In chapter 3 we have reviewed some issues of international migration. The discussion has covered the issues like the determinants of international migration, performance of migrants and consequences of migration in host country, ‘Brain Drain’ or ‘Brain Gain’, migration, remittances and economic development, initiatives of international bodies in international migration. Temporary migration has received special attention in the discussion. Many insights of the research conducted in the thesis have come directly from the reviews conducted in chapter 3. Chapter 4 and 5 set up models where two countries are engaged in competition with each other in sending people aboard. The competition in international labour market is immensely important in many developing countries. Many countries are highly dependent on the remittances thus competing with other countries in sending people to work abroad. These competitions play an active role in intergovernmental negotiations as the countries require to balance between ‘promotion’ of overseas employment and ‘protection’ of migrants. Within economic literature we have not seen efforts to model this competition of labour exporting countries. Chapter 4 has modelled a situation where two exporting countries send labour to a third country. This chapter assumes unskilled migration as such labour migration is entirely controlled by the respective governments. The governments want to send labour to get remittances in return thus engage in a Cournot-type competition with the other labour exporting country. The importing country on the other hand acts as a Stackelberg leader as it sets up its immigration tax policies by moving first. We have observed that the labour importer uses discriminatory tax policies for the different labour exporting countries to fulfil its national objective. The tax rate is higher for the country with higher labour endowment. Chapter 5 has adopted a similar model as chapter 4. However the assumption of unskilled migration has been replaced by the assumption of skilled migration. It is thus assumed that migrants do not need governments’ assistance to migrate or governments are not in a position to control migration. Thus they use taxes to control migration and maximise national income. In this regard the exporting countries engage in Bertrand type competition with each other in setting emigration tax rate. We have found that skilled migrants should be taxed by the exporting countries to maximise national income. The importing country again resorts to the discriminatory tax policy as obtained in chapter 4. The tax rate is as before higher for the country with higher labour endowment The analysis of chapter 6 can be linked with the recent literature of ‘Brain Drain’. We have assumed a model where two countries are engaged in strategic trade with each other. We have then analysed effects of labour market openness and migration on research and development of countries. It is assumed that the wage rates of one country is higher than the other country’s which gives the rationale for migration. With the opening up of labour market and threat of possible migration, wage rates of both skilled people who conduct research and unskilled people who conduct production fall. We have analysed mainly three cases – (1) only labour-importing country conducts R&D, (2) only labour exporting country conducts R&D and (3) both countries conduct R&D simultaneously. The analysis shows that the possibility of migration of only skilled people always increases R&D. It also increases welfare by reducing the price of output. However the migration of unskilled people may not always increase welfare. We expect that the analysis done in the thesis will be able to provide some guidelines in migration policy making. Firstly we observe no strong coalition among the labour sending countries to manage and control international migration, though labour importing countries are to some extent managing migration jointly. This thesis along with any possible future work may provide guidance in joint management of international migration by the exporting countries. Secondly, many exporting countries are subsidising skilled migration by providing training and other supports. The thesis is suggesting that labour exporting countries should tax the skilled migrants. In this regard the issue of skilled migration may need re-evaluation. Thirdly, the thesis is pointing towards some possible gains from skilled migration through increased research and development. This position is to some extent at a par with the literature of ‘Brain Drain’ that pointed towards the beneficial effects of skilled migration. In summary it appears that we have obtained some interesting results in the analysis done in the thesis. We hope that they will be proved useful in migration policies and will contribute in future progress of both developed and developing countries.

"In an efficient market all identical goods must have only one price." So states the aptly named law of one price. In the real world, however, one may easily verify that identical products are often sold for different prices. This thesis develops an extension of the Bertrand model in economics to include spatially localised competition to explain this price variation, which is then studied through simulation methods and theoretical analysis. Our model studies the effect that local heterogeneities in the environment experienced by sellers have on successful pricing strategies. Taking inspiration from models of evolutionary dynamics, we define the fitness of a seller and evolve seller prices through selection and mutation. We find three distinct steady states in our model related to the probability that a seller experiences competition for a buyer, mediated by the number of bankrupt sites in the system. When competition-free sales are unlikely, the system collapses on to a single price. If temporary monopoly situations do exist sellers can accumulate capital and variation in prices is stable. In this scenario, sellers spontaneously separate into two classes: cheap sellers – requiring sales to every potential buyer; and expensive sellers – requiring only occasional sales. Finally, we find an intermediate regime in which there is a single highly favoured price in the system which oscillates between high and low extrema. We study the properties of these steady states in detail, building a picture of how globally uncompetitive sellers can nonetheless survive if competition is strictly local. We show how the system builds up correlations, leading to niches for expensive sellers. These niches change the nature of the competition and allow for long-term survival of uncompetitive sellers. Not all expensive prices are equally likely in the steady state and we analyse why (and where) peaks in the price distribution appear. We can do this exactly for the early time dynamics of the model and extend the argument more qualitatively to the steady state. This latter analysis allows us to predict, for an observed steady distribution, the minimum price an expensive seller should charge to guarantee profit. The oscillatory ‘steady state’ is qualitatively reminiscent of boom and bust cycles in the global market. We study methods to suppress the oscillations and suggest ways of avoiding catastrophic crashes in the global economy – without negatively affecting the ability of outliers to make large profits.

In the literature on contests, punishments have received much less attention than prizes. One possible reason is that punishing the bottom player(s) in a contest where all contestants are not allowed to quit, while effective in increasing contestants' total effort, often violates individual rationality constraints. But what will happen in an open contest where all potential contestants can choose whether or not to participate? In chapter 1, we study a model of this type and allow the contest designer to punish the bottom participant according to their performances. We conclude that punishment is often not desirable (optimal punishment is zero) when the contest designer wants to maximize the expected total effort, while punishment is often desirable (optimal punishment is strictly positive) when the contest designer wants to maximize the expected highest individual effort. In the literature on imperfectly discriminating contests, researchers normally assume that the contest designer has a certain level of accuracy in choosing the winner, which can be represented by the discriminatory power r in the Power Contest Success Function (the Power CSF, proposed by Tullock in 1980). With symmetric contestants, it is well known that increasing accuracy (r) always increases total effort when the pure-strategy equilibrium exists. In chapter 2, we look at the cases where the contestants are heterogeneous in ability. We construct an equilibrium set on r > 0, where a unique pure-strategy equilibrium exists for any r below a critical value and a mixed-strategy equilibrium exists for any r above this critical value. We find that if the contestants are sufficiently different in ability, there always exists an optimal accuracy level for the contest designer. Additionally, as we increase the difference in their abilities, the optimal accuracy level decreases. The above conclusions provide an explanation to many phenomena in the real world and may give guidance in some applications. In chapter 3, we propose the Power Contest Defeat Function (the Power CDF)which eliminates one player out at a time over successive rounds. We show that the Power CDF has the same good qualities as the Power Contest Success Function (the Power CSF) and is more realistic in some cases. We look at both the Power CSF mechanism (selecting winners in sequence) and the Power CDF mechanism (selecting losers in sequence) and show that punishments increase expected total e¤orts signi cantly. More interestingly, we also find that when the contestants' effort levels are different, the Power CDF mechanism is more accurate in finding the correct winner (the one who makes the greatest effort) and the Power CSF mechanism is more accurate in finding the correct loser (the one who makes the smallest effort).

The Black-Scholes model and corresponding option pricing formula has led to a wide and extensive industry, used by financial institutions and investors to speculate on market trends or to control their level of risk from other investments. From the formation of the Chicago Board Options Exchange in 1973, the nature of options contracts available today has grown dramatically from the single-date contracts considered by Black and Scholes (1973) to a wider and more exotic range of derivatives. These include American options, which can be exercised at any time up to maturity, as well as options based on the weighted sums of assets, such as the Asian and basket options which we consider. Moreover, the underlying models considered have also grown in number and in this work we are primarily motivated by the increasing interest in past-dependent asset pricing models, shown in recent years by market practitioners and prominent authors. These models provide a natural framework that considers past history and behaviour, as well as present information, in the determination of the future evolution of an underlying process. In our studies, we explore option pricing techniques for arithmetic Asian and basket options under a Stochastic Delay Differential Equation (SDDE) approach. We obtain explicit closed-form expressions for a number of lower and upper bounds before giving a practical, numerical analysis of our result. In addition, we also consider the properties of the approximate numerical integration methods used and state the conditions for which numerical stability and convergence can be achieved.

The thesis contains four chapters on the structure and predictability of individual differences Chapter 1. Re-analyses data from Holt and Laury's (2002) risk aversion experiments. Shows that big-stakes hypothetical payoffs are better than small-stakes real-money payoffs for predicting choices in big-stakes real-money gambles (in spite of the presence of hypothetical bias). Argues that hypothetical bias is a problem for calibration of mean preferences but not for prediction of the rank order of subjects' preferences. Chapter 2. Describes an experiment: Participants were given personality tests and played a series of dictator and response games over a two week period. It was found that social preferences are one-dimensional, stable across a two-week interval and significantly related to the Big Five personality traits. Suggestions are given about ways to modify existing theories of social preference to accommodate these findings. Chapter 3. Applies a novel statistical technique (spectral clustering) to a personality data set for the first time. Finds the HEXACO six-factor structure in an English-language five-factor questionnaire for the first time. Argues that the emphasis placed on weak relationships is critical to settling the dimensionality debate within personality theory, and that spectral clustering provides a more useful perspective on personality data than does traditional factor analysis. Chapter 4. Outlines the relevance of extraversion for economics, and sets up a model to argue that personality differences in extraversion may have evolved through something akin to a war of attrition. This model implies a positive relationship between extraversion and risk aversion, and a U-shaped relationship between extraversion and loss aversion.

This thesis employs advanced econometric methods to understand the determinants of race inequalities in labour markets and in higher education in Brazil. It then investigates whether race diversity can be used as a policy to reduce existing inequalities in pay and college campuses. It uses data from the National Household Sample Survey PNAD of 2005 and the National Examination of Higher Education Courses (ENC/Provão) of 2003. The main methodological contributions of this thesis are: 1) extending wage models to include several variables which can explain more than 40 percent of the total variation in wages; 2) computing a proxy for parental education (this has not been possible to estimate using PNAD since 1996); 3) correcting wage equations for selection bias using a robust instrument (most studies ignore the sample selection problem by using employed males only); 4) implementing a new algorithm that combines Heckman Two-Step, complex sample weights and constrained least squares (this increases robustness of the detailed decomposition of the discrimination term). This is done in a generalized wage decomposition setting where the level of discrimination is invariant to the choice of the reference wage group. Results show an existing pay-gap and a significant level of discrimination against nonwhites even after corrections are made. Selection bias appears to underestimate the discrimination term considerably. This study also develops a theoretical framework for the study of the impact of diversity on labour productivity and on discrimination simultaneously. Results support policies which seek greater diversity in order to reduce the existing inequalities in labour markets and on higher education campuses. However, the outcome of policies aimed at increasing diversity on campuses can significantly differ depending on the existing level of diversity and the subject majors attended by students.

Whether we would like to model imports and exports, or forecast inflation, structural variation in an economy frequently causes problems. This thesis examines such variation in two dimensions: first, in a cross-section of individuals, and secondly, over time. A panel of manufacturing industries in several developed countries reveals that there is substantial variation across sectors, in the response of trade to changes in prices and incomes. Ignoring this heterogeneity can render conventional results biased and inconsistent, so a number of robust methods are used to obtain reliable estimates of long-run and short-run trade relationships. The findings point to common behaviour across sectors, which could be due to similarities in technology. The impact of structural breaks over time is examined in the second part of the thesis. Unpredictable shifts in deterministic terms such as the mean of a process are shown to generate significant forecast failure, and even the methods used to evaluated forecast accuracy are affected. Using the Kullback-Leibler discrepancy to measure the size of forecast errors, various robust mechanisms are discussed, that do not fail systematically after a break. Although they can provide a degree of insurance if a shift does occur, this comes at a cost if there is no change, and in the presence of measurement error they can exacerbate the uncertainty surrounding a forecast. An empirical illustration with a model of UK money demand provides some support for the automatic correction mechanisms, although there does seem to be a role for direct modeling of a break process.

The work presented here is part of a wider research programme oriented around three specific questions. First, how do individual agents appropriate returns from innovation and how is this affected by the availability (or not) of intellectual property rights such as copyrights and patents? Second, how does this translate into the aggregate production of knowledge, once one takes account of the interaction between producers and the cumulative nature of the process of knowledge production? Finally, How can we incorporate this into an estimate of the welfare trade-off inherent in intellectual property rights (the basic prerequisite for formulating rational IP policy)? The dissertation contains theoretical work on each of these questions together with a brief introductory preamble and a review of the existing literature on the economics of knowledge.

Most financial markets operate as double auction markets in which buyers and sellers submit limit and market orders. In this case the traders have to decide firstly whether they want to submit a buy or sell order and then secondly what the limit price of this order is. In this thesis I develop further a theoretical model based on Chatterjee and Samuelson (1983) in which two traders trade with each other in a double auction market. Assuming that both traders assign a private value to the asset they are trading, which is known only to them but not their trading partner, I determine whether the traders should submit a buy or sell order and what the optimal limit price should be. I develop a single-period model in which traders only trade once and thus cannot learn each other’s private values from trading as well as a multi-period model that allows to infer to some degree the other trader’s private value from their order submission behavior. Using this theoretical model as a benchmark, I then conducted experiments with students to evaluate whether the actual behavior of students fits the theory developed. Although we find that in general the behavior of traders is consistent with the proposed theory, there are some significant differences. Most notably traders seem to underreact to differences in their own private value, i.e. do not adjust their limit price to the extend suggested by theory. I evaluate these outcomes in light of results established results in behavioral finance.

This thesis composes of four empirical studies with an attempt to assess the role of institutions as key determinant of cross-country development. We have unbundled the different facets of institutions, including the security of property rights, democracy, regulation and stability of monetary policy. In Chapter 2, we investigate the direct impact of institutions on economic growth using dynamic panel data estimations. Employing this estimator aims at alleviating the technical problems embedded in the existing literature. Our results suggest that the security of property rights and stability of monetary policy have direct impact on economic growth, whereas democracy and regulation are not directly growth-enhancing. In Chapter 3, we further explore the role of democracy and regulation in the development process. We empirically test whether economic reform is more likely to take place in democratic economies. The answer seems affirmative. More specifically, our empirical results show that democracy causes reforms in redistributive policies, trade liberalisation and credit market deregulation. In the next Chapter, we consider the institutional barriers as compared to natural barrier and at-the-board barriers as determinants of bilateral FDI. The augmented gravity model provides empirical evidences to support that geography, regional integration and domestic regulatory environment of the destination economies all have significant impacts on FDI inflows. In particular, credit market regulation is amongst the most important, which echoes the view that financial development is essential to economic development. In the final empirical work, we hypothesise that institutions matter to cross-country economic performances as economies with better institutions are technically more efficient. We estimate a global stochastic production frontier, where countries lie below the frontier are less efficient. Our empirical results suggest that countries with better security of property rights and fewer regulations allocate their production inputs more efficiently. The effects of democratic regime and stability of monetary policy are also positive to improve inefficiency, if a threshold level of human capital is reached. Other possible factors like openness and human capital, in turn, seem not to play direct role. Our research provides empirical basis to understand how particular aspects of institutions could affect development outcomes.