This thesis is a collection of three independent essays that applies microeconometrics techniques to empirically study topics in development and labour economics. The first chapter uses evidence from a natural experiment in Bangladesh, where households were treated to different types of transfer, food grains and cash, at different periods in time, to test the effect of these transfers on household consumption behaviour. Using the fixed effect instrumental variable model, the estimation results show that though in-kind transfers did cause households to consume more grain than they would have chosen under equal-value cash transfers, the impact on calorie consumption and children health status is minimal. Households that received cash were able to reallocate their funds more effectively, and chose to spend their extra income on clothing and children's non-food consumption, while at the same time spending no more on vices. The second chapter investigates the dynamics of living standards in Thailand. Income and earnings processes are first modelled after the statistical Galton-Markov process before being extended to follow a more structural permanent earnings model. Empirical estimations of income and earnings persistence in Thailand employ both constructed pseudo-panel data from Thailand's Labour Force Surveys and the Townsend Thai panel data. Galton-Markov estimates found conditional persistence to be low in Thailand. However, quantile regression estimates find that persistence is low at the bottom of the distribution but high at the top, indicating a divergence in earnings as time passes. A study of the covariance structure of earnings finds that total variation in the earnings process is predominantly driven by moderately persistent transitory components following the AR(1) process. The third chapter attempts to empirically fit the power-law distribution and study the dynamics of inequality, especially at the upper end, of the income and consumption distribution in Thailand. We find that using the popular but incorrect method based on the linear regression approach will lead to researchers drawing a wrong conclusion. Regression estimates of the power-law exponent, a, provide strong evidence of power-law fit in Thailand. However, from the implementation of the superior Clauset et al. method, the evidence in support of the power-law fit is much weaker. Estimates of a for both income and consumption suggest that there is low inequality at the top in Thailand but further inspection finds that there is a high level of persistent between-group inequality between the top and bottom ends of the distribution. In addition, following Battistin et al. (2009), we find weak support for Gibrat's law of proportional random growth as the income-generating process in Thailand.

The three chapters in this thesis consider the role macroprudential policy can play in economic booms and busts. The first two chapters concern the recent housing boom in the United States. Whilst it is popularly thought that a significant easing of credit standards caused the boom, the econometric attempts to establish this are largely inconclusive. The fall in real interest rates also fail to account for the magnitude of the boom, suggesting buyers' irrational exuberance. I approach this problem in a new way using tiered housing data that separately covers the price movements of cheap and expensive houses. During the US boom, the cheapest houses had the largest relative price gains in 51 of 52 metro areas studied. In the first chapter I use a simple model to show that this pattern could not have occurred without an easing of credit standards: without this, buyer exuberance or a fall in interest rates would produce the opposite pattern. Chapter two examines alternative explanations for the tiered pattern, including changes in housing supply, speculation and differential income growth. I show that these variables are not responsible for the pattern, but that, in keeping the theory, there is a statistically and economically significant relationship between credit easing and the relative performance of low and high tier house prices. Taken together, the two chapters conclude that the housing boom would have significantly smaller if policy had prevented credit standards from easing. The third chapter considers credit traps; a situation in which a severe financial crisis gives rise to a prolonged period of low lending to, and stagnation of, the real economy. We introduce a model in which credit traps are possible, then consider what macroprudential policy can do to help the economy escape from a trap, and to reduce the chances of falling into one.

This thesis titled “Essays in Labour Economics” is comprised of three essays investigating various determinants of earnings inequality. Chapter 1 provides a novel explanation for labor market polarization—the rise in employment shares of high and low skill jobs at the expense of middle skill jobs, and the fall in middle-skill wages. We argue that recent and historical episodes of polarization resulted from increased automation. In our theoretical model, firms deciding whether to employ machines or workers in a given task weigh the cost of using machines, which is increasing in the complexity (in an engineering sense) of the task, against the cost of employing workers, which is increasing in training time required by the task. Some tasks do not require training regardless of complexity, while in other tasks training is required and increases in complexity. In equilibrium, firms are more likely to automate a task that requires training, holding complexity constant. We assume that more-skilled workers learn faster, and thus it is middle skill workers who have a comparative advantage in tasks that are most likely to be automated when machine design costs fall. In addition to explaining job polarization, our model makes sense of observed patterns of automation and accounts for a set of novel stylized facts about occupational training requirements. Chapter 2 establishes a novel source of wage differences among observationally similar high skill workers. We show that degree class — a coarse measure of performance in university degrees — causally affects graduates’ earnings. We employ a regression discontinuity design comparing graduates who differ only by a few marks in an individual exam, and whose degree class is thus assigned randomly. A First Class is worth roughly three percent in starting wages which translates into £1,000 per annum. An Upper Second is worth more on the margin—seven percent in starting wages (£2,040). In addition to identifying a novel source of luck in the determination of earnings, our findings also show the importance of simple heuristics for hiring decisions. Chapter 3 asks whether public policy affects the degree of intergenerational transmission of education. The chapter investigates this question in the context of secondary school transitions in Germany. During the last three decades, several German states changed the rules for admission to secondary school tracks. Combining a new data set on transition rules with micro data from the German Socioeconomic Panel (SOEP), I find that allowing free track choice raises the probability of attending the most advanced track by five percentage points. However, the effect is twice as large for children of less educated parents. The results suggest that the correlation between parents’ and children’s educational attainment may be reduced by more than one third when no formal restrictions to choosing a secondary school track exist.

The central aim of this thesis is to provide an exposition of the decay of the categories of political economy first made famous by classical political economy, but subjected to rigorous critique by Marx. An explanation of the following form the theoretical core of the thesis: the decay of the categories - abstract labour, value and capital (in its fixed, circulating and variable forms); how the decay of these categories led to the collective formation of the working class; and how, combined, they provide the key to understanding the full ramifications of the weakening of commodity fetishism and decline of capitalism. More specifically, the thesis is concerned with establishing an alternative Marxist theory of the decline of capitalist social relations of production in Britain. The thesis moves through three distinct phases to complete the task comprehensively. Firstly, a critique of the existing literature concerning decline is undertaken, with specific reference to Britain. Secondly, an alternative Marxist theory of decline is put forward. Thirdly, the full implications of the theory is then expounded by way of a case study of British capitalism. Of course capitalist social relations of production are universal, in the sense that they are global relations of exchange and exploitation, as well as being specific to individual nations. Therefore, inevitably, the exposition of the concept of capitalist decline will extend, on occasions, beyond my chosen case study - Britain. Nevertheless, the main concern is with British capitalism and its specific path to decline.

The number of investor-state arbitration disputes has been on the rise since the mid 1990s. Their determinants are still not fully understood. This study empirically examines the effects of economic crises on investor-state arbitration claims, based on international investment agreements (IIAs). We use a unique dataset containing 961 investor-state arbitration claims covering 132 host (defendant) and 75 home (claimant) countries over the 1986-2017 period. We find that episodes of economic crises are positively and significantly associated with the number of investor-state arbitration cases and we uncover evidence that the type of economic crisis matters. In addition, the positive impact of economic crises on arbitration cases is inversely related to the rule of law in a host country. These results are consistent with the view that governments are prioritizing policy actions aiming at mitigating the negative impact of economic crises over compliance with their obligations in IIAs. From a policy perspective, our results suggest that besides strengthening the rule of law domestically, the IIA system should be reformed with a focus on avoiding a vicious circle, thus shortening the recovery period after economic crises. / Series: Department of Economics Working Paper Series

This thesis explores the imaginary dimensions of economic crisis through a study of the interface between practices of historical representation and processes of social construction. Its core argument is that a sense of history cannot be disentangled from the phenomena that it strives to apprehend. As a result, there can be no fixed and objective relation between the evolution of global capitalism and its long history of crises. Instead, the very intelligibility of both ‘crisis’ and ‘history’ is produced through an iterated telescoping of time, whereby more or less distant events and episodes are grasped together in ways that lend meaning to those of the present. This argument is taken forward via an in-depth and quasi-historical analysis of the 2008 crisis. Focusing on how past crises figure within the pronouncements of international policymaking organisations and the commentary of the global financial press between 2007 and 2009, it develops a typology of different practices of historical representation and the various interpretive functions they are capable of performing. In so doing, it makes a theoretical contribution to the constructivist and cultural political economy literatures on the discursive negotiation of crisis.

The thesis consists of three chapters with Chapters 2 and 3 providing experimental evidence on the role of cheap-talk and a third party recommendation in reducing or aggravating conflict. Chapter 1 surveys the theoretical, empirical and experimental literature on the determinants of conflict. Chapter 2 considers an experiment based on Baliga and Sjostrom (BS, 2004) to investigate whether communication reduces the probability of an arms race. We find that communication does indeed reduce the possibility of using strategies that lead to an arms race, even when the unique Bayesian Nash equilibrium without communication has both players playing a strategy that leads to an arms race. Chapter 3 considers a set of experiments based on Baliga and Sjostrom (BS, 2012) to understand if third parties can provoke conflict. We adapt their model to experimentally test if a third party recommendation can trigger conflict. While in some treatments with recommendation, more players do choose an aggressive strategy compared to the treatment without, none of them are statistically significant. We propose a number of explanations for why provocation may not necessarily increase conflict in this environment.

Many Sub-Saharan African economies experienced high growth rates over the last decade, a welcome change from the depression and stagnation which characterized them during the 1980s and 1990s. However, improved economic performances were mostly driven by an increase of both price and demand for the natural resources of which the continent is rich, so that these growth rates were not associated with a significant increase in industrial diversification. The poor quality of the power infrastructure of many African economies represents one of the major obstacles to their structural transformation. In this thesis we investigate the effects of an unstable power supply on the profitability of Sub-Saharan African firms. To avoid estimation issues related to the possible endogeneity of the relationship between power supply and productivity we develop an instrument based on the water available for hydropower production. Our results show that frequent power outages are indeed a very significant drag on firms’ performance, much more so for firms without access to back-up capacity than for the overall sample. The final part of the thesis also investigates the general relationship between hydropower production and economic activity in Sub-Saharan Africa through the use of night-light data.

The frequency and intensity of flooding has increased over the last few decades. The UK is not an exception, despite large amounts of money invested every year in flood risk management, flooding is a prevalent issue in the country causing millions of losses every year. In this thesis we contribute to debate on the economic valuation of flood risk in the UK from a household perspective using a non-market valuation approach from the housing market. In the first chapter we investigate the capitalisation of flood risk in property prices by means of a meta-analysis. In the second and third chapters we use a repeatsales specification of a hedonic model to investigate the capitalisation of flood defences and the effect of flooding in the price of properties in England. The results suggest that the current benefit estimates used by the UK Government to determine the allocation of resources to flood relief projects results in a misallocation of resources. We highlight the importance of rethinking the strategy for flood risk management in the UK. Our results provide a sound economic basis to guide the allocation of resources for flood alleviation strategies in a socially efficient way.

This dissertation estimates households’ willingness to pay (WTP) for an improved electricity service in North Cyprus. Stated WTP is estimated using choice experiments (CE), contingent valuation methods (CVM), and approximated using the averting expenditure (AE) method. These estimates rely on data collected from 350 in-person interviews conducted during the period August 5-22, 2008. Using the Tobit model, an average household’s averting expenditures are estimated to be 3.13 YTL/month. In the CVM section, the spike model with varying spike, varying mean, and constant standard error specification results in a median WTP of 23.03 YTL per month and a mean WTP of 29.14 YTL per month. Using CE, compensating variation estimates for eliminating summer and winter outages are calculated using parameter estimates from the mixed logit (ML) model with interactions. The compensating variation is 6.65 YTL per month and 25.83 YTL per month respectively. Among the three valuation methodologies, WTP per hour unserved ranges from 0.13 YTL (0.11 USD) to 1.22 YTL (1.03 USD). In order to avoid the cost of outages, households are willing to incur a 1.5%-13.5% increase in their monthly electricity bill.