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The thesis consists of a short introduction and three self-contained analytical chapters on land policy in developing countries. Chapter 1 examines the agricultural investment choices of small-scale farmers in Ethiopia whose land will be expropriated to provide space for a large factory. I use data from a survey of households conducted before expropriation occurred, but after the policy was announced. I identify the anticipation effects of land expropriation using variation in whether households own plots located inside or outside the proposed project boundary. Households facing immediate expropriation hedge against future income risk by using less fertilizer on their plots, and and growing less risky crops. These households are more likely to grow sorghum (a safe crop) and less likely to grow wheat (a relatively riskier crop). Households also respond to the threat of expropriation by reducing long-term investments in soil quality. Using two-stage least squares I show that subjective beliefs about the likelihood of expropriation act as a channel through which the threat of expropriation affects investment decisions. The results are robust to a number of other specifications, including some that account for unobservable geographic variation in plot characteristics. Chapter 2 explores the consequences of land expropriation for small-scale farmers in Ethiopia. Expropriation of farmland is used by all levels of government in Ethiopia as a tool for providing new land for industrial investors, commercial agriculture and expanding cities. Farmers usually receive a cash payment in exchange for their land based on a fixed formula to establish the price of land. I evaluate the impact of such a policy on a group of small-scale farmers and assess the extent to which they make the transition to new livelihoods. On average, households lose 70% of their land and receive compensation payments that are about 5 times the value of their annual consumption expenditure. Using data collected before and after the intervention I examine the impact of expropriation and compensation on household consumption, productive assets, livestock holdings, savings and labour market participation. Households in the treatment group increase their consumption, start more businesses and participate more in non-farm activities than households that do not lose farmland. These households also reallocate livestock portfolios away from oxen and towards small ruminants and cattle, reflecting a shift away from growing crops. However, these shifts to new livelihoods are relatively small compared to the amount of compensation kept as savings: with the exception of a few households, most of the compensation payment is left in commercial banks earning a negative real return. Chapter 3 focuses on the recent increase in large-scale agricultural land deals across Africa and the nature of the contracts reached by governments and foreign investors. In recent years, multi-national firms and foreign governments have entered into long term contracts with host countries in which large tracts of land are purchased or leased for commercial agricultural production in exchange for promises of infrastructure development, job creation and rural infrastructure improvement. The profitability of these projects is uncertain, especially at a time of increased agricultural commodity price volatility in world markets. Based on stylized facts about land deals I present a theoretical model of land contracts reached by host governments and foreign investors that explains the policy tradeoff between investment timelines, revenue generation and uncertainty. When agricultural projects require fixed infrastructure investment and yield uncertain payoffs, firms benefit from being able to complete the fixed investment in stages. If firms can learn more about payoffs by holding off on investment, they effectively hold an option to abandon the project. The value of this option provides a channel by which uncertainty affects the terms of the land contract. When host governments determine the terms of the contract by setting an income tax, a royalty rate and an investment timeline, the value of this option will affect government's optimal policy choice. In particular, I find that if governments benefit a great deal from investment spillovers the optimal contract will be designed to encourage firms not to abandon a project. But, if governments benefit relatively little from investment spillovers, governments will choose contract parameters to extract the value of the firm's option to abandon the project. I end by examining the effect of increasing uncertainty on the government's optimal policy choice.

I examine the importance of human capital for economic development in Thailand during the period of high economic growth and structural transformation (1985-2000), using labour force survey data. The three main chapters attempt to estimate the effects of education, as a measure of human capital, on three major outcomes in the Thai labour market, namely (i) earnings; (ii) sector of employment; and (iii) earnings inequality. I address the endogeneity problem of education using an education policy shift—the change in the compulsory schooling law—that produces exogenous variation in education. The three main chapters adopt distinct modelling frameworks. The details of each of the main chapters are as follows. The third chapter investigates how education increases earnings and the probability of being in the non-agricultural sector. As the education policy shift influences educational attainment in a discontinuous way, a regression discontinuity (RD) framework is adopted to identify the average returns to education and the effect of education on the sector of employment. It is important to emphasise that the RD technique constrains the effects of education on the two outcomes to be linear and to be applicable only to sub-populations. My results confirm significant effects of education on both earnings and the sectoral sorting process. In addition, there are heterogeneous effects of education by gender. The fourth chapter is an extension of the previous chapter. I allow the returns to education to be heterogeneous across education levels and sectors of employment, while attempting to estimate the returns for the entire population. I use a control function (CF) approach and a double selection correction to estimate the sectoral earnings process, while jointly accounting for the choice of education and the selection into sectors and paid employment. I find that the returns to education are non-linear and higher in the non-agricultural sector especially for medium and highly educated workers. This suggests that human capital plays a crucial role in facilitating a structural transformation towards the non-agricultural sector. In the final chapter, I study how the increased primary education completion rate affects earnings inequality. While there exists a burgeoning literature on the average returns to education, less attention has been devoted to estimating the effects of education on the distribution of earnings. I identify the effects of primary education completion on earnings at different points of the distribution, and thus earnings inequality, using a recently developed approach, called regression discontinuity distributional treatment effects. My results suggest that the increased primary education completion rate reduces earnings inequality as the returns to primary education are larger for the poor than the rich.

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This thesis considers how fiscal and monetary policy should be conducted in resourcerich economies. It consists of three papers addressing: whether governments should spend, save or invest volatile oil income; the assets they should save in; and how monetary policy should respond. The first, “Eight principles for managing resource wealth”, shows that capital-scarce countries should save relatively less against oil price volatility, and invest more in domestic capital. They also should prepare for volatility in advance, and treat savings as a source of income rather than a temporary buffer. To show this the paper develops a framework that nests a variety of existing results, which are presented in eight principles. The second, “The Elephant in the Ground: Oil extraction and asset allocation in sovereign wealth funds”, shows that governments should use sovereign wealth funds to offset oil price risk, extract oil faster if its price is pro-cyclical, and use precautionary savings to manage any residual volatility. To do this it combines three strands of literature for the first time: on continuous-time portfolio theory, oil extraction and precautionary savings. The third, “Optimal monetary responses to oil discoveries”, addresses the anticipation effects around an oil discovery. It shows that the terms of trade will need to appreciate twice: once when oil is discovered and consumers anticipate future revenues; and again when the government begins spending the revenues. Oil wealth will give the monetary authority an incentive to appreciate the terms of trade, in addition to stabilising domestic inflation and the output gap. Optimal policy is well-approximated by a standard monetary rule that also responds to expected changes in the natural level of output.

This thesis consists of four separate chapters which address different aspects of inequality and income determination. The first three chapters are country-level studies which examine (1) how incomes are shaped by spatial price differences, (2) the factor income composition, and (3) enterprise size. The final chapter analyses how income inequality changed at the global level. The first chapter investigates the implications of regional price differences for earnings differentials and inequality in Germany. I combine a district-level price index with administrative earnings data from social security records. Prices have a strong equalising effect on district average wages in West Germany, but a weaker effect in East Germany and at the national level. The change in overall inequality as a result of regional price differences is small (although significant in many cases), because inequality is mostly explained by differences within rather than between districts. The second chapter is motivated by the rapid increase in top income shares in the United States since the 1980s. Using data derived from tax filings, I show that this pattern is very similar after controlling for changes in tax unit size. Over the same period as top income shares increased, the composition of these incomes changed dramatically, with the labour share rising. Using a non-parametric copula framework, I show that incomes from labour and capital have become more closely associated at the top. This association is asymmetric such that top wage earners are more likely to also receive high capital incomes, compared with top capital income recipients receiving high wages. In the third chapter, I investigate the positive cross-sectional relationship between enterprise size and earnings using panel data from Ghana. I find evidence for a significant firm size effect in matched firm-worker data and a labour force panel, even after controlling for individual fixed effects. The size effect in self-employment is stronger in the cross-section, but it is driven by individual time-invariant characteristics. The final chapter studies the global interpersonal income distribution using a newly constructed and improved database of national household surveys between 1988 and 2008. The chapter finds that the global Gini remains high and approximately unchanged at around 0.7. However, this hides a substantial change in the global distribution from a twin-peaked distribution in 1988 into a single-peaked one now. Furthermore, the regional composition of the global distribution changed, as China graduated from the bottom ranks. As a result of the growth in Asia, the poorest quantiles of the global distribution are now largely from Sub-Saharan Africa. By exploiting the panel dimension of the dataset, the analysis shows which decile-groups within countries have benefitted most over this 20-year period. In addition, the chapter presents a preliminary assessment of how estimates of global inequality are affected by the likely underreporting of top incomes in surveys.

Garment sector trade unions have proved largely powerless to combat hypermobile transnational capital’s systematic extraction of surplus value from the newly industrialized Global South. Optimized conditions for accumulation coupled with the 2005 phase-out of the Multi-Fibre Agreement (MFA) have meant a radical geographic reconfiguration of the globalised garment industry heavily in favour of capital over labour. The thesis approaches the global garment sector from multiple vantage points across the world with the goal of uncovering the obstacles to workers' organisation, examine workers' strategies of resistance, and analyse the changing composition of labour and capital within the clothing commodity chain. The thesis highlights five distinct but interconnected case studies including a transnational workers campaign from a garment factory in Honduras; a history and present-day feasibility of establishing a transnational collective bargaining from El Salvador to Turkey to Cambodia; the prospects for a countermovement in the organizing strategies at the bottom of the clothing commodity and supply chain in Bangalore; the growth of a 'full package' denim manufacturer in changing the relationship between 'buyers' and 'suppliers' on the outskirts of Bangalore; and finally a continuation of this analysis the case of a strike at a monopoly footwear supplier in China. The central research question is: How do workers build power and establish workers' rights in the globally hypermobile garment sector? Ultimately, what is demonstrated within this thesis is that the actions of garment workers shaped and circumscribed the actions of capital in the sector, and as capital transformed new landscapes for accumulation new vistas for opposition begin to emerge.

This thesis is an investigation into the microeconomic mechanisms that govern some of the occupational choices faced by workers in Sub-Saharan Africa, and into the monetary and non-monetary returns to their decisions. Chapter 1 begins by exploring the decision process that leads workers to allocate themselves to different occupations within the economy. In particular, I investigate the role of risk-aversion in the allocation of workers between formal and informal jobs in Ghana, hence attempting to explain a fundamental dimension of duality through an investigation into workers' preferences. In my model of sectoral allocation risk-averse workers can opt between entering the free-entry informal sector and queuing for formal occupations. Conditional on identifying the riskier option, the model yields testable implications on the relationship between risk-aversion and workers' allocation. My testing strategy proceeds in two steps. First, using the first three waves of the Ghana Household Urban Panel Survey (GHUPS) dataset, I estimate expected income uncertainty and find it considerably higher in the informal sector than in formal employment. Second, using experimental data to elicit risk-attitudes I estimate the effect of risk-aversion on occupational choices and I find that, in line with the first result, more risk-averse workers are more likely to queue for formal jobs and less likely to be in the informal sector. The conclusion of the first chapter is that attitudes to risk should feature more prominently in models of sector allocation and in the design of labour market policies, in particular when those policies aim to impact workers' vulnerability to risk and uncertainty. Chapter 2 focuses on the largest occupational category in the Developing world, self-employed workers with small productive activities, and it tries to estimate the returns to different productive assets, namely physical capital, labour and human capital. These are the workers that form most of the informal sector analysed in chapter 1, which allows me to draw a direct link with the analysis so far. The chapter begins by specifying a model for the income-generating process grounded in the literature on firms' production and hence abridging the gap between the analysis of individual earnings and the study of firms' value added. Identification in the empirics is achieved by means of panel estimators that are suitable to address the endogeneity of input choices, which derives from both time-varying and time-invariant unobservable heterogeneity. The use of these estimators is made feasible by the length of the Ghanaian Household Urban Panel Survey dataset at CSAE. I also explore issues of endogeneity in the selection of different technologies, defined by their relative capital and labour intensity. Finally, I analyse the shape of returns to capital, with the aim to detect potential non-convexities in technology. The results show that capital and work-experience play the strongest role in income-generation, while the shares of value added attributed to labour and to formal schooling are low. Marginal returns to investment are high at low capital levels and they decrease very rapidly, pointing against the existence of non-convexities due to minimum scale requirements, but implying that real income gains resulting form micro-investment are modest. Chapter 3 returns to the issue of earnings uncertainty and risk-aversion explored in Chapter 1, but it now takes the allocation choice as given and explores the direct welfare implications of income uncertainty for worker's well-being. Namely, the chapter explores the relationship between income and welfare, with a particular attention on the link between income vulnerability and happiness. Using unique longitudinal data on life-satisfaction and labour market outcomes, I estimate an individual measure of vulnerability (defined as the probability of falling below a low-income threshold) and investigate its effect on well-being. After controlling for unobservable individual fixed effects, work-satisfaction, relative income and other relevant worker characteristics, I find a sizable impact of vulnerability, over and above the income effect. When I explore the mechanisms behind my results, I find that aspiration adaptation to current income may result in a transitory income effect. Moreover, using my direct measure of attitudes to risk from field-experiments (already used in chapter 1), I can test directly the hypothesis that more risk-averse agents suffer more heavily from a given increase in income vulnerability. Overall, my findings support policy interventions that aim to reduce vulnerability, as I expect such policies to have a 'direct' impact on agents' happiness given the prevailing attitudes to risk and uncertainty in the population. Finally, from the point of view of overall social welfare, my results suggest that non-Rawlsian growth models, whereby 'someone may be left behind', may fail to enhance general welfare, for high enough levels of risk-aversion in the population, if the risk of falling behind is sufficiently widespread.

The <u>first essay</u> [“Twin Deficits and Free Lunches: Macroeconomic Outcomes In Anticipation of Foreign Aid”] concerns itself with situations in which private agents anticipate a future windfall (free lunch) that will help service the debt resulting from a present fiscal expansion (implemented via a temporary tax cut). Such expectations of a windfall can arise in the context of natural resource discoveries or, more interestingly, due to perceptions by agents in “too important to fail” countries that will be bailed out through higher foreign aid or debt relief. We employ an overlapping generations model featuring credit constraints to study the real effects of such free lunch expectations in a small open economy, drawing contrasts with the standard tax and money finance closure rules. The model is solved analytically and shows that anticipated aid is equivalent to current aid when agents have perfect foresight, so that a temporary tax cut is seen as permanent. Accordingly, agents raise their consumption and indebtedness (at the expense of future generations) by an amount that is an increasing function of their “impatience” (subjective rates of time preference plus probability of death). A worsening of the current account obtains (twin deficits) across a range of plausible closure rules, including those featuring money finance. The introduction of credit constrained households (we study the variant where myopic agents spend their current disposable incomes) does not alter the basic result in the case of full aid finance, but does matter for mixed tax-aid regimes, in more complex settings where agent expectations and donor promises on aid diverge, and when governments face borrowing constraints so that the timing of aid delivery matters. The <u>second essay</u> [“The Role of Domestic Debt in Economic Growth: An Empirical Investigation For Developing Economies”] focuses on the remaining source of government financing, i.e. domestic debt, and the role it can play in mobilizing private savings, facilitating credit intermediation in higher risk settings (i.e. serving a “collateral” function on bank balance sheets), developing financial markets and supporting economic growth in general. To investigate this question empirically, we set up a new domestic debt database covering about 100 developing economies, going back three decades to 1975; explore Granger causality links between domestic debt and key macroeconomic and institutional variables; and estimate the growth impact of domestic debt using panel regressions, allowing for non-linear effects. Domestic debt, as a share of GDP is found to exert a significant positive impact on economic growth, with potential channels including domestic savings mobilization, provision of risk-insurance on banks’ balance sheets; and greater institutional accountability of the state to its citizens. Although this result countervails more established arguments against domestic debt (i.e. that it leads to crowding out and banks to become lazy), there is some evidence that above a ratio of 35 percent of bank deposits, domestic debt does begin to undermine economic growth. The growth payoff also depends on debt quality, with higher payoffs observed for positive interest-rate bearing marketable debt issued to nonbank sectors. The <u>third and final essay</u> [“Why Do Banks in Developing Economies Hold Domestic Government Securities?”] explores demand-side determinants of domestic debt, by focusing on commercial bank holdings of government paper, discriminating carefully between voluntary factors (such as mean-variance portfolio optimization) and statutory ones (cash reserve and capital adequacy requirements). The analysis is made possible by the construction of a dataset on government and private returns (real and nominal) for almost 600 banks from 70 emerging and low-income economies, spanning the (pre-Basel II) period 1995-2005. A battery of structural cross-section regressions indicates that banks’ portfolio decisions are at least as significantly influenced by mean-variance considerations as regulatory factors: the actual portfolio share of government securities (λ) responds intuitively, and sizably, to variations in the moments of the distributions for government and private returns as well as in the minimum-variance portfolio share (λ*). Higher cash reserve requirements tilt portfolios away from government securities toward riskier private lending, while higher capital adequacy requirements work the other way. The association between actual portfolios and the identified determinants is noticeably weaker at lower ends of the λ distribution, suggesting the domination of non-CAPM factors in those contexts.