The effectiveness of foreign aid has been a hotly debated issue in the growth and development literature. This thesis contributes to the existing literature on the effectiveness of foreign aid and its impact on development and growth in developing countries. Also, it provides an empirical and theoretical framework for understanding the incentives behind the decision making of aid donors. This thesis evaluates whether donor governments provide more foreign aid to countries where they exert more influence. The additional empirical results obtained here permit a re-evaluation of the existing literature on foreign aid, as well as adding some verification of previous results by other researchers and, hopefully, providing extra evidence in the area of foreign aid studies. The main contributions of this thesis are the following: first, the panel data methodology has been applied to all empirical analysis in this work. In contrast, most of the previous work has been done using the time series or cross section estimations separately. Second, I have reexamined the findings of the earlier work done by Levy (1987). Third, I have analysed the effect of corruption on foreign aid as one of the factors that affects its effectiveness. The empirical evidence in this area is not very well researched and can be described as mixed and inconclusive, which has intensified the arguments. Fourth, I have reassessed the link between foreignaid and economic growth by considering the potential link between aid and structural transformation in sectoral production terms, as well as explored the possible presence of `Dutch disease' in provision of foreign aid. Fifth, the motivations of donor countries have been assessed to examine whether they provide foreign aid as an altruistic gesture or for political and economic gains. The literature on this issue has so far presented mixed results. The main aim of this thesis is to try to have a better understanding of the issues surrounding the questions: Is foreign aid effective? Does foreign aid help to promote growth and development? It then tries to address more specific issues as: What are the main motives of donor governments in the provision of foreign aid? Are there signs of `Dutch disease' in the provision of foreign aid? Can failure of foreign aid be a result of the presence of corruption in the recipient countries? This thesis will attempt to provide a satisfactory, and as exhaustive as possible, an answer to each of the above questions. Also, this work includes a literature review on all subjects addressed in this thesis. The main findings of this thesis are the following: the reassessment of the findings by Levy (1987) suggest that most of the official development assistance is going for consumption in low-income countries and not on the investment. These results strongly contradict the results obtained by Levy (1987). The contribution to the empirical literature on the possible presence of `Dutch disease' in provision of foreign aid suggest that, while the theory on `Dutch disease' and structural transformation may imply the presence of `Dutch disease' when a country receives foreign aid, our empirical tests were inconclusive. Although there are clear signs of structural transformation, the results for the effects of aid are small. Overall, results are not robust, which makes it difficult to establish whether aid drives structural transformation or leads to `Dutch disease'. The empirical results on the main motivations of donors and more precisely donors from the Development Assistance Committee (DAC) towards the main objectives behind aid provision suggest that DAC donors take into account the needof the recipient countries, though donors look after their own interests to a great degree as well. This analysis implies that countries tend to pay more attention to the `need' factor in the low-income countries and to a lesser extent in lower-middleincome countries. An interesting finding is that donors tend to give more aid to countries where they have a higher share of aid to overall aid received by a country. This `reputation effect' has an impact on the provision of aid by donor countries. This can be explained that by doing this, donor economies tend to indirectly show their power and dominance. The empirical results on a panel and on a cross-section of countries to measure the effect of corruption and aid shows that aid has no impact on growth, while countries with higher levels of corruption have lower growth rates

Among many alternative models developed in response to recent experimental evidence, the reference-dependent model emerged as one of the more realistic and more capable of capturing individual choices in the static situation. In this thesis, I explore whether reference-dependent model can also be applied to one of the most important human activity, intertemporal decision-making. In chapter one, I review three prominent economic theories. I also give a brief review of experimental studies on intertemporal decision-making. In chapter two, I extend the reference-dependent preference model to intertemporal choices. The model is based on the idea of loss aversion studied by Kahneman and Tversky (1979), and the idea of mental accounting studied by Thaler (1985, and 1999). Here, an individual’s utility depends not only upon her current consumption level but also her current reference level. Hypotheses of how an individual’s reference is formed are also explored. An individual’s reference could either be endogenously determined by option bundles, exogenously determined by her anticipations of outcomes, or a hybrid reference level. In chapter three, we develop a model of reference-dependent preferences, where an individual is uncertain about her future circumstances. Here, an individual’s utility is composed of an intrinsic consumption utility and a reference-dependent gain-loss utility, and her reference levels follow a random walk process. While the model does not explicitly include time discounting and no return on saving, it nevertheless may offer an alternative explanation of present bias and negative time preference (future bias). In chapter four, I explore whether subjects’ behaviour in a within-subject choice experiment is consistent with a number of existing and emerging theories, namely hyperbolic discounting theory, Rubinstein’s similarity procedure, and a novel model of reference-dependent preferences. The major results of the within-subject choice experiment are that none of these three theories explain subjects’ behaviour. However, among these three theories, the novel model of reference-dependent preference performs no worse than Rubinstein’s similarity procedure, and hyperbolic discounting theory performs the worst with subjects’ behaviour.

Some modern happiness economists, such as Layard and Frank, propose a policy of collectively reducing hours at work, based on the assumption that concern about status is a fundamental property of human nature. However, psychologists who subscribe to the self-determination theory (SDT) and personality studies find that the attitude of social comparison is inherently incompatible with the psychological process of happiness, and suggest that people should change their competitive attitudes. In line with these psychologists, the political philosopher Rawls and the political economist Frey argue that fair and just institutions could cultivate non-envious attitudes, which can then enhance happiness. Their policies are compatible with psychological theories, since these policies provide people psychological needs proposed by the SDT- autonomy, competence and relatedness. I therefore conclude in my psychological analysis of happiness policies in Chapter 2 that Rawls's and Frey's policy can increase happiness while Layard's policy cannot help extreme status lovers, but can help those caring about status moderately. I then test my argument empirically in Chapter 3. The results support my argument developed in Chapter 2. Moreover, there is evidence suggesting the mechanism through which Layard's policy improves happiness is not attainable for extreme status seekers: status lovers have lower quality of family life. To the contrary, the results suggest that the mechanism through which Rawls's and Frey's policy promotes happiness is plausible. Assuming that status seekers have negative marginal utility of family hours, I establish theoretical models to show the possible inefficacy of Layard's policy in Chapter 4. The model can also demonstrate that Rawls's and Frey's policy of cultivating non-envious attitude can promote happiness effectively.

This thesis analyses four aspects of migration in developing countries with uncel1ainty as the critical feature. First, we consider the effects of uncertainty on the decision to migrate. Our findings show that uncertainty matters in the timing of migration by bringing it forward or delaying it depending on the source of uncertainty. Uncertainty results in cautious behaviour by households, which explains why, in spite of observing huge wage differentials between regions, the scale of migration appears relatively small. Income differentials are thus not sufficient for migration. Second, we build on the uncertainty in the area of migrant origin by analysing the relationship between vulnerability to poverty and migration. We develop a conceptual framework that identities the uncertainty of migration outcomes as an important variable in affecting household vulnerability, even though migration is widely regarded as a strategy to offset the risk of falling into poverty. Third, we consider how the poor finance their migration. We develop an interlinked contract in which migrant households can borrow form richer households. Our model explains the empirical observation that migration rates by the very poor from villages with high inequalities are high even though the poor are generally prevented from migration because of the costs. The uncertainty of lending to a household with no collateral for migration, which itself is uncertain, is overcome through the interlinked contract. Fourth, we show that migration has a signalling effect. which can reveal infom1ation on the quality of skilled migrants. There is uncertainty on migrant productivity that is only resolved by migration. Thus the information generated can he used to develop modern sectors in the sending region if migration results in favourable outcomes. The thesis makes a theoretical and methodological contribution in the analysis of these four aspects.

This thesis contains five empirical studies of the determinants and effects of innovation and technology adoption. Chapter 2 investigates the skill-bias of Information and Communication Technologies (lCT) using a unique dataset of manufacturing firms in Brazil and India. Two main empirical approaches are taken. First, I estimate the relationship between adoption of ICT and changes in employment shares of skilled workers at the firm level. Second, I exploit exogenous variation in the relative supply of skills across states within each country to show that ICT adoption is higher in states with a larger relative supply of skilled workers. The next two chapters examine the geographical location of R&D and its impact on the diffusion of knowledge. Chapter 3 uses matched firm-level accounting and patent data to examine whether UK firms with a high proportion of US based inventors are better able to access US R&D spillovers. Chapter 4 uses novel data on levels and changes in university research quality in the UK to examine the extent to which domestic and foreign-owned R&D labs are co-located with relevant university research. Chapter 5 examines the impact of product market reforms on innovation and productivity growth in EU countries during the 1990s. The chapter exploits exogenous variation in the impact of the 1992 Single Market Programme to show that product market reforms were associated with higher R&D spending and faster productivity growth. Finally, Chapter 6 examines the productivity impact of ICT in Brazil and India. I find extremely high estimated returns to ICT capitaL even after controlling for firm fixed effects and investments in organisational change. Within India I find that ICT capital intensity is lower in states with worse infrastructure quality and more pro-worker labour regulation, while the returns to ICT are lower in states with worse infrastructure quality.

This thesis comprises two main topics. The first part of the thesis focuses on the regulation of health care provision, while the second part provides empirical evidence ofthe economic consequences ofchronic diseases in developing countries. The first part examines the incentives that condition the relationship between hospitals and health care purchasers (Chapters 1 and 2) and the provision .ofpreventive care in a competitive health insurance market (Chapter 3). There are three main areas ofconsideration. Chapter 1 presents an axiomatic bargaining model of prices and activity, examining the negotiation between hospitals and purchasers in situations where, as usually occurs, none of the parties hold all of the bargaining power. Chapter 2 estimates the effect of waiting times on hospital costs using a sample of 283 hospitals over the period 1995-2002 in the NHS. This analysis seeks to clarifY the efficiency effects ofimposing waiting times for elective surgeries. Chapter 3 extends Rothschild and Stiglitz's (1976) model of adverse selection in a competitive health insurance market by considering the incentives for prevention. The second part of the thesis consists of two. empirical investigations regarding the economic effects of chronic diseases in Brazil, India and Russia. Chapter 4 provides an analysis of the relationship between socio-economic inequality . and chronic diseases, whilst Chapter 5 estimates the effect of chronic diseases on household economic performance, as measured by health expenditures, nonhealth expenditures and labour productivity. The results emphasise the relevance of chronic diseases for developing countries, challenging the view that this problem is restricted to more developed societies.

The objective of this thesis is to develop more realistic long term asset models based on L´evy processes and discuss their applications to risk management of unitised with-profits policies. We investigate the behaviour of long-term returns of the UK total share return index by testing the common statistical properties for financial data, so-called “stylised facts”. We show that for the monthly U.K. share total return indices, the Gaussian return hypothesis is rejected in series of tests. The local distribution of the returns has higher kurtosis and heavier tails than the Gaussian. In addition, the returns series show significant nonlinear autocorrelation, extreme returns appear in clusters. The first long term asset model purposed in this thesis is the exponential L´evy model with non-Gaussian increment. We describe the Generalised Hyperbolic distributions with their subclasses. They are considered as candidate distributions for the increments of the driving L´evy processes. We estimate model parameters to the UK share gross total return index using two approaches, maximum likelihood (MLE) and Markov Chain Monte Carlo (MCMC) algorithm. Statistical and graphical goodness-of-fit tests demonstrate that these L´evy driven models give more accurate fits to the historical equity index returns data. For the liability model we consider long term participating life insurance products specifically unitised with-profits contracts. The payouts of unitised with-profits policies are simulated under a variety of asset models driven by L´evy processes. At first a basic model policy is considered with limited insurer operations and no risk controls. We look into various risk measures of the maturity loss for the insurer xiii and compare the statistical properties for different non-Gaussian increment L´evy models. It is found that the classical Gaussian model substantially underestimates the risk measures in unitised with-profits policies. The L´evy driven models which have semi-heavy tailed increments are aggregate to normal distributions in the long run. Then we consider different retrospective bonus mechanisms by varying the participating rate and the smoothing period. As a comparison we use a bonus earning power method with deterministic projected maturity asset share and 25 percent terminal bonus cushion. We study the joint distributions of the maturity asset shares and guarantees under these two bonus mechanism. With similar risk measures, there are larger expected maturity guarantees under bonus earning power method than retrospective bonus. Declaring bonuses on a more frequent basis is then tested, which has the desired effect of reducing the risk measures when declaring monthly bonuses using bonus earning power mechanism. We make observations on two different investment strategies, a diversified investment strategy and a hedging based investment strategy. The former method tries to reduce the variance of the invest return distribution while the hedging investment strategy, on the other hand, narrows the left tail of the maturity loss distribution by paying an extra amount of expenses. Finally, the L´evy models are extended by using GARCH(1,1)-m type volatility. Both maximum likelihood estimators and Bayesian estimators using Markov Chain Monte Carlo are presented. The statistical tests on the devolatilised data show that the GARCH model reduces the non-linear autocorrelation in the conditional return processes and furthermore improve the fitting of the asset models. Also, multi-variable models are considered. Stochastic bridges driven by L´evy processes are constructed while the yearly returns follow the Wilkie model.

The first global recession of the twenty-first century has been widely characterised as a crisis rooted in secured credit default. But in the UK, a different, less visible, but increasingly common tale of credit default exists, which not only predates the economic downturn, but continues to compound its effects: that of unsecured, consumer credit default. This is the object of this thesis: it focuses on tracing the changing calculative landscapes that heavily indebted and defaulting consumer credit borrowers in the UK move through, from periods of borrowing, to managing debts, to being confronted by debt collectors. It draws together the perspectives of borrowers, defaulters, collectors, industry analysts and spokespersons, as well as insights from visits to three major debt collection agencies, shedding light on a domain of socio-economic life which has been subject to little detailed empirical research. At the centre of the thesis is the concept of ‘market attachment’, drawing on work within the ‘economization’ programme within economic sociology. In so doing, the thesis argues that in existing accounts of market attachment there has been a lack of attention (a) to the variable modes through which markets seek to enact attachments between consumer and producer and (b) to those constraining market attachments from which ‘detachment’ is difficult. In particular, the thesis explores the relationship between ‘affective’ modes of social action and economic calculation. Drawing attention to how emergent, corporeal relations can become central to markets, the thesis contributes towards enriching the vocabulary and expanding the potential empirical focus of economic sociology. In so doing, the thesis explores the distributed politics of consumer credit, centring on the separation enacted between ‘lender’ and ‘collector’. This separation, the thesis argues, is not only useful for the collections industry, it is strategically put to work and routinely re-enacted as a generative market device.

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The thesis is composed of three essays on auction theory. The focus is mainly on the English auction, which is probably the format most commonly used. In the English auction, a bidder can see his opponents' activity as the price is gradually raised starting from a very low price. When only one bidder is left, such bidder is declared the winner and pays the price at which the last but one bidder exited. The vast majority of the studies assume that the price is raised continuously and that a bidder cannot outbid the current winner by a discrete amount, or to use the terminology employed in the literature to place a jump bid. Such a restriction is often unrealistic and examples of jump bidding can be found in many relevant contexts. In the first two chapters, we analyze settings in which jump bidding is allowed. Previous studies suggest that the possibility of placing a jump bid can be used to signal one's strength and induce the opponents to quit (on average) earlier than they would have otherwise. In our first paper we follow this approach. In particular, as Fishman (1988), we assume that the purpose of signalling is to discourage the opponents from acquiring finer information regarding their valuations. As opposed to Fishman (1988), we look at an environment where bidders' valuations are determined not only by a private (as he does) but also a common value element. We show that the presence of a common element makes jump bidding harder. Secondly, we prove that when the bidder placing the jump knows his total value but not the relative importance of the common value part, a jump bidding equilibrium can be sustained more often and it yields higher profits than when the bidder knows exactly such value. In the second paper, we introduce a different and new rational for jump bidding, which involves no signalling or information costs. In an interdependent value setting, where a bidder's value depends on the valuation of the other bidders, it is crucial whether a bidder's exit price is known or not. Jump bidding offers the possibility of hiding the exit value of some opponent, thus affecting the expected value of the remaining bidders and ultimately their bidding behaviour. We illustrate when hiding such information might be profitable. We also show that its effect both on revenues and efficiency is in general ambiguous. Finally, in the last paper (joint work with Hernando-Veciana) we contribute to the important issue of determining which is the most efficient way to allocate an object among a set of potential buyers. Previous studies provide both conditions under which it is possible to allocate the object to the buyer with the highest willingness to pay (First Best), and mechanisms that can implement such an allocation. We characterize the most efficient allocation when the First Best cannot be implemented. Then, we study whether the English auction can implement it. While an equilibrium of the English Auction that implements the Second Best exists, it is in general not robust if there are more than two bidders.