This thesis studies the emergence of, and the interaction between, inequality in earnings and inequality in wealth, when labour markets are frictional. Chapter 1 investigates the implications of search frictions and human-capital accumulation for the equilibrium distribution of wages when firms invest optimally in match-specific productivity. Optimal investment choice is incorporated in a framework along the lines of (Burdett et al., 2011) and equilibrium is characterised. The effect of the rate of human capital accumulation on equilibrium dispersion of firm productivities and wages is analysed in a numerically solved version of the model. Chapter 2 studies the empirical relationship between wealth and two labour market outcomes - re-employment wages and unemployment durations. The analysis complements a closely related literature by exploiting new data from the Survey of Income and Program Participation. As in prior studies, negative relationship between net worth and hazard rates to employment is documented. In disagreement with prior studies, the relationship between re-employment wages and net worth is found to be non-monotonic and it is argued that prior findings likely result from misspecification. The implications of the relationship serve as a motivation for the third chapter. Chapter 3 (joint with Melvyn Coles) presents a model of the consumption-leisure tradeoff for risk-averse workers when labour markets are frictional. Optimal behaviour is that of a life-cycle consumer - work when young and save for retirement (non-participation) later - planning retirement efficiently. The analysis has highly tractable implications for wealth dynamics which emphasise life-cycle motives, labour-market decisions, persistent differentials in ability and heterogeneity in initial wealth. The model's empirical relevance is assessed; it is demonstrated that it provides an empirically convincing explanation for much of the between-households inequality in wealth.

This thesis consists of four chapters positioned at the interface of economics and geography. They analyse spatial disparities in economic activity using applied microeconometric methods. Chapter I describes trends in wage inequality once differences in local costs of living are taken into account. I use spatial variation in house prices to construct a local consumer price index and show that prices rose faster for non-graduates than for graduates between 2001 and 2011. In a period when nominal wage inequality came to a halt real wage inequality kept rising. Chapter II builds up on this result and analyses the effect of real wage differentials on working hours. Looking at individuals that face different wages and house prices as they move across labour markets, I find that working hours are significantly higher in low real wage areas. The effect is due to labour supply adjustments of low skilled workers implying that affordability considerations are more important than additional leisure options due to a higher amenity level. Within a city amenities are important determinants of an individual’s location decision. Chapter III looks at the role of amenities for skill specific sorting in British cities. An amenity value is inferred from a hedonic regression and correlated with neighbourhood as well as individual characteristics. The results suggest that holding income constant graduates are willing to pay 0.2% more for amenities than individuals with a lower educational status. Chapter IV studies the effect of a public sector employment shock on private sector employment using the relocation of the German government from Bonn to Berlin as a natural experiment. The findings indicate that the relocation of jobs generates localized employment spill-over effects in the service sector. 100 additional public sector jobs generate 60 private sector jobs up to a 1km distance from the area receiving the relocation.

This thesis explores the role of temporary staffing agencies (TSAs) in the local labour market by analysing the social interactions and relationships between TSAs and their clients. It argues that different agencies can reshape and reproduce the temporary staffing industry (TSI) and labour markets in locally specific ways. The research responds to calls for the TSI to be understood as “more than a ‘neutral’ service industry” (Coe et al., 2009a:58) and the limited body of knowledge relating to the tactics of different sized TSAs (beyond the multinationals). It examines how different sized TSAs can make markets locally – by actively creating demand, wining new business and influencing employment – or how they may be marginalised by the activities of competitors. This research fulfils the need to examine the role of TSAs in the local labour market. Pilot research identified three themes that contribute to addressing these gaps: i) the affect of local labour market characteristics on the process of recruitment; ii) the contractual and social relationships between agencies and their clients; and iii) the influence of size on the activities of agencies locally. The study took place in Birmingham and focuses on TSAs which recruit within the light industrial and driving sectors.

I present three essays discussing the impact of archaic institutions and technology on inequality in wages and political participation. First I examine a modern facet of the Indian caste system: political quotas for disadvantaged minorities and their impact on political participation. I find that aggregate turnout falls by 9% of the baseline and right-wing parties win 50% more often, but electoral competition is not significantly affected. Detailed individual-level data for one state suggests that voter participation falls among women and minorities. This suggests that restricting candidate identity to minorities may cause some bias in voter participation. Next, I study caste and human capital: specifically why workers remain in lowpaying hereditary occupations, providing an explanation for both occupational specialization and hereditary occupations. I use a simple model of insurance provision in which parents pass on human capital to their children in return for insurance in the event of sickness, and find that workers with low human capital are likelier to participate in the arrangement, and that a higher cost of sickness can sustain higher human capital transfers. I conclude by studying human capital and technology- the impact of information and communication technologies (ICT) on wage inequality. We tested the hypothesis that information and communication technologies (ICT) polarize labour markets, by increasing demand for the highly educated at the expense of the middle educated, with little effect on low-educated workers. Using data on the US, Japan, and nine European countries from 1980-2004, we find that industries with faster ICT growth shifted demand from middle educated workers to highly educated workers, consistent with ICT-based polarization. Trade openness is also associated with polarization, but this is not robust to controlling for Research and Development. Technologies account for up to a quarter of the growth in demand for highly educated workers.

This thesis consists of three independent chapters. The first chapter examines the strategic choices of the targets and the intensity of violence by rebel groups. The chapter presents a theoretical framework that links a rebel group’s targeting decisions to income shocks. It highlights that this relationship depends on the structure of the rebels’ tax base. The hypotheses from the model are tested in the context of India’s Naxalite conflict. The second chapter estimates the impact of military recruitment on human capital accumulation in colonial Punjab. In this context, I find that higher military recruitment was associated with increased literacy at the district-religion level. The final chapter presents a model that describes the optimal design of civil-military institutions in a setting where some control of the military over domestic politics is deemed desirable.

The thesis investigates under what conditions the European Employment Strategy (EES) can influence the domestic employment policy of European Union member states. It aims to answer the question by examining two critical or ‘least likely’ cases: Greece and Portugal by focusing on three key areas of employment policy: public employment services, gender equality policies (mainstreaming, reconciliation and pay gaps) and ‘flexicurity’. The thesis employs the ‘Europeanization’ approach and tests the hypothesis that ‘if the EES altered Greek and Portuguese employment policy at all, it did so through one of three main Europeanization pathways: (i) policy learning; (ii) the domestic empowerment of policy entrepreneurs; (iii) financial conditionality.’ In examining the domestic impact of the EES the thesis does not presume an Europeanization effect a priori. Rather, the research begins from the domestic level (in a process-tracing method) and investigates whether, how and to what extent the EES had a role in the Greek and Portuguese domestic policy. The possibility of other variables, either external or internal, being pre-eminent is examined. The empirical study sought to triangulate a wide range of methods and sources. Although Greece and Portugal share a number of characteristics that may inhibit Europeanization in this type of area, empirical evidence largely supported the research hypothesis and suggested that two key conditions were conducive to the EES having a domestic impact in these cases: the existence of successful policy entrepreneurs who would actively use the EES as a policy window to promote their agenda and -when these were absent or lacked access to power and resources- the existence of the European Social Fund financial conditionality. Thus, soft power can be wielded in the world of neglect without policy learning which is considered the main ‘soft’ mechanism of domestic change in the literature.

The aim of this thesis is to explain the existence and coexistence of diverse hired labour arrangements in two contrasting localities in rural West Bengal (India). Hired labour arrangements for seasonal migrants are included in the analysis, the methods for which are drawn from a review of the contractual arrangements literature. One study locality, in Bardhaman District, was characterised by double-cropping of paddy facilitated by groundwater irrigation, the other, in Purulia District, by rainfed paddy cultivation. The structure of landownership was skewed - more so in the Bardhaman locality. Daily employment records were kept by ninety-two sampled households over two seasons. In each locality six different indigenous types of hired labour arrangement were identified. Analysis of the rationales for the existence and coexistence of these labour arrangements and of the variation within each type confirmed the embeddedness of the terms and conditions of labour hire (including those for migrant labour) in the land-holding structure, in ideologies of gender and caste, and in party political allegiances. Possibilities for and constraints on hiring out labour in particular arrangements are explained in part by the logic of deployment of household labour to unwaged reproductive and productive work, which is also socially embedded in the same way. The thesis thus sets a new agenda for research. It questions the received wisdom on rural labour exchange in India: i) that villages tend to have just one wage rate for 'casual' labour determined by supply and demand alone, ii) that stylised labour arrangements (eg 'casual' and 'attached') are appropriate occupational classifications for individuals and households, and iii) that rural labour is immobile. If the coexistence of diverse labour arrangements is to be explained, more, careful microstudies are required, so that a typology of socio-economic, political and agro-ecological contexts can be developed.

Public policies are an important determinant of the welfare of individuals and the society at large. Careful evaluation of the impact of public policies on welfare is therefore imperative for our understanding of the positive and normative implications for these institutions. The three chapters of this thesis examine the welfare consequences of specific economic and political institutions. Chapters 1 and 2 study two distinct channels through which social housing, a common feature of developed countries, may impact the neighborhoods in which they are built and the labor market outcomes of their low income tenants. Chapter 1 is concerned with the effect of the provision of social housing on neighboring private ats. It assesses the spillovers of low-income tenants and the change in the composition of the housing stock that are to be expected from the provision of new social housing units. In particular, it uses the direct conversion of private rental flats into social units without any accompanying rehabilitation to identify the impact of the inflow into the neighborhood of low income tenants, separately from the effects of social housing on the quality of the existing housing stock. Chapter 2 shows that social housing influences the location of low income tenants, and that the neighborhood of social housing units may improve the labor market outcomes of the poorest tenants. I observe the relocation of welfare recipients through the selection process of social housing applicants in the city of Paris from 2001 to 2007. The institutional process acts as a conditional randomization device across residential areas in Paris. The empirical estimates outline that neighborhoods have weak short- and medium-run effects on the economic self-sufficiency of poor households. Chapter 3, by contrast, focuses on how regional migrations of unemployed workers may affect their job search prospect in Europe. Using a longitudinal sample of French unemployment spells, the empirical estimates outline positive migration effects on transitions from unemployment to employment that depends on the previous duration of the unemployment spells.

The entire literature on adverse selection in the labour market spawned by Greenwald (1986, Review of Economic Studies, 63(3)) has been built, somewhat unwittingly, on the assumption that firms forget the type of a worker after the worker quits. In many contexts, this assumption is implausible. The first three chapters of this thesis therefore explore an alternative approach to modelling labour markets with asymmetric information by assuming firms will never forget a worker's type. The first chapter turns the standard Greenwald result on its head by showing that if the worker knows her own type and productivity is unchanging, the possibility of competitive wage offers from fully-informed previous employers means that adverse selection will never persist. Job changing frictions can cause a semi-separating equilibrium where the more productive workers have their type revealed whilst the least productive workers receive a pooling payoff. But even where asymmetric information persists there is no adverse selection because job changing frictions shield potential employers from the winner's curse. The second chapter investigates the robustness of the non-persistence of adverse selection result where previous employers are asymmetrically informed. The result is found to be robust where firms bid for the worker under a closed but not an open auction. The third chapter finds that, if workers are not sure of their exact value to their employer, there will be an adversely selected stream of job changers in equilibrium, even as the probability of a worker quitting for exogenous reasons approaches zero. Less able workers are quickly revealed as such, whilst more able workers have their type revealed gradually. The fourth substantive chapter of this thesis investigates the widely observed paradox that, despite what traditional economics would lead us to believe, there can be such a thing as too much choice. The model provides a formal theoretical explanation for this phenomenon using the regret theory of Loomes and Sugden (1982, Economic Journal, 92(368)). When options are few it is shown that enlarging the choice set improves welfare, but when options are many, a "less is more" phenomenon emerges. In some cases, excess search options can decrease search.

This thesis presents three empirical chapters on local labour markets, mineral booms, beliefs, conflict and uncertainty. All the analysis was conducted using Peruvian data and context. The first chapter finds that Peruvian individuals exposed to violent events during their impressionable years trust less government institutions, and feel less identified with their neighbours, while more identified with religious groups. The estimated effect is small and heterogeneous depending on the identity of the perpetrator. The effect on identification with groups of population is also heterogeneous by the indigenous origin of the individuals. Owners of an agricultural plot embedded in a cooperative setting at the local level exhibit even smaller levels of identification with their locals while higher levels of identification with their ethnic group. In line with recent literature, these findings suggest that conflict has a small but persistent effect on the formation of trust and identity, which is a central feature to understand the interaction between culture and institutions, and ultimately to understand the persistent consequences of wars. The second chapter studies the relationship between democratic beliefs and economic uncertainty. I explored whether uncertainty experienced during the impressionable years of the individuals is a key factor behind the formation of the democratic beliefs. Results showed that this type of uncertainty had no effect on the determination of democratic beliefs. Combining uncertainty with the exposure to authoritarian regimes did not change the result. This result is robust to different definition of rural individuals, the interaction of uncertainty and degree of experienced authoritarianism, and different formative periods. Current uncertainty, on the other hand, was unable to fully explain the formation of democratic beliefs. The final chapter investigated the local labour effects of mining booms. Using two rounds of population census for 1043 districts in Peru I documented that large-scale mining activity had a positive effect on local employment over 14 years. The effect was differentiated by industry, skill and migration status. Employment grew by 4% faster by one standard deviation increase in the mineral prices. Both high and low skilled workers enjoyed similar employment increase, however only low skilled workers experienced a decline in unemployment. Using data from 10 annual household surveys I found that, consistent with a model of heterogeneous firms and labour, wages for low skilled workers in districts close to the mining activity was 5% higher by every standard deviation increase in the index of mineral prices. Additional evidence with the census data suggested that to a large extent locals working in the mining or the agricultural sector filled the new employment opportunities. Together these findings suggest that large-scale mining activity increases the demand for mining and agricultural local employment, and the wages in the local economy.