This thesis contains three essays in Microeconomic Theory. Chapter 1 studies the incentives of a seller to voluntarily disclose or sell information about a buyer to a third party. While there are obvious benefits to sharing information with other sellers, there is also an incentive cost which is due to her learning about the buyer through her own trade with him. To study this trade-off we analyse a model in which a buyer interacts sequentially with two sellers, each of whom makes a take-it-or-leave-it offer. The buyer learns his valuation for the good of each seller sequentially but these might be correlated. We model information disclosure using Bayesian persuasion. Chapter 2 provides various extensions of the model presented in Chapter 1. Chapter 3 provides empirical evidences that demonstrate that the investors of a fund update their opinion on the fund manager’s ability faster during bear markets. We build a theoretical model to demonstrate a channel which would result on this empirical observation. We consider a continuum of potential investors who allocate funds in two consecutive periods between a manager and a market index. The manager’s alpha, defined as her ability to generate idiosyncratic returns, is her private information and it is either high or low. In each period, the manager receives a private signal on the potential performance of her alpha, and she also obtains some public news on the market’s condition. In Chapter 4 we demonstrate that the relative job security that CEOs enjoy can be partly attributed to the high sophistication of the managerial labour market. To do this we build a theoretical model in which a representative investor proposes a contract to a manager, which also specifies the conditions of his termination. Production is a function of the manager’s effort and ability, both of which are his private information. The former is a choice variable, whereas the latter follows a Geometric Brownian motion. The manager’s post-termination payoff is generated by an exogenous managerial labour market, and it is equal to his expected ability. The market learns his ability with some given probability, which we interpret as its sophistication. Otherwise, it forms its posterior based on his termination time.

This thesis investigates what motivates people to protect the environment and protect themselves from environmental risks. Specifically, the essays aim to enhance our understanding of how individual and situational factors drive decision-making in three areas that lie at the heart of behavioural environmental economics: contributions towards protecting public goods like biodiversity, choices under risk from environmental externalities like air pollution, and cooperation over shared common pool resources. The overarching goal of the thesis is to unpack the complex processes behind decision making, to identify policy-relevant mechanisms to promote both planetary and human health and wellbeing. Given this, the essays adopt an experimental approach to study themes like pro-social behaviour, affect, risk preferences, beliefs and social influence, in conjunction with different information and incentive-based interventions. Paper 1 explores the direct impact of different types of audiovisual information through the charismatic megafauna and outrage effect on contributions to biodiversity conservation. It also signals that mixed emotions could be drivers of pro-sociality in the conservation context. Paper 2 charts the indirect spillover effects of these video interventions on subsequent pro-environmental behavioural intentions. Taken together, the papers highlight the potential of the narratives in videos to encourage public engagement and conservation action to address the sixth mass extinction event. Papers 3 and 4 explore the psycho-social determinants of avoidance behaviours amongst active travellers, namely cyclists in London. In Paper 3, risk perception rather than risk preferences seem to be a better predictor of avoidance behaviour in the context and sample studied. Domain-specific risk preferences via the willingness to take health risks showed more behavioural validity as regards risk-taking while cycling, and the evidence for cross-context validity was not strong. Paper 4 showed that underlying beliefs about air quality determine how individuals respond to social norm messaging. These results collectively suggest that subjective beliefs about environmental risks influence individual choice under uncertainty in the context of air pollution avoidance. Paper 5 explores how the peer monitoring and punishment network structure affects cooperation in a commons dilemma. The results suggest that although free-riders are punished in all networks, incomplete and connected networks elicit lower punishment towards those who deviate less than the socially optimal amount. The complete network elicits more punishment, leaving this network as the least efficient at least in the short-run. Although individuals are initially optimistic about others pro-sociality across networks, beliefs converge to the selfish equilibrium more rapidly in complete networks. The results show that the underlying socio-spatial structure of peer monitoring institutions has welfare implications.

The first chapter investigates the role of financial intermediation in explaining the occupation choices. A large fraction of the labour force in developing countries is own-account workers who work for themselves and have no paid employees. This paper argues that imperfect financial intermediation drives a wedge between the return on saving and the cost of borrowing. A larger wedge generates a lower return on saving and a higher borrowing cost. The lower return induces individuals with some wealth but low entrepreneurial ability to manage their own wealth. Together with a wage fall when financial intermediation worsens, the model predicts higher share of own-account workers and lower share of wage workers. The second chapter explores the impact of One-Child Policy on human capital and aggregate income. A quantity-quality trade-off predicts an increase in human capital when fertility falls. The higher human capital level contributes to aggregate output but the lower fertility reduces the size of future labour force, hence reduces aggregate output. In a quantitative OLG model, I show that the human capital level of children born under the strict One-child Policy increases, but the policy’s effect on aggregate income turned negative in around 2000 due to smaller size of labour force. The third chapter examines the effects of a decline in transaction cost of information good. We classify industries into information sector and noninformation sector, and we classify labour into information labour and noninformation labour. We make two observations from the data. The first is the increase in the share of information intermediate input in total intermediate input. The second is the increase in return to information labour relative to non-information labour. In a two sector model, We find that under reasonable parameter assumptions, a decline in transaction cost of information good cannot explain both facts.

This thesis presents three essays. The first examines the effect of having a breadwinner mother on children’s gender norms in England. It shows that, while boys with breadwinning mothers are less likely to develop traditional views, girls are more likely to become traditional, in opposition to their family’s norm but in line with society’s. It then develops a model of gender identity, showing that the results can be explained by girls’ weaker preference for conformity to their family. Finally, it employs conformity measures to show that this prediction holds empirically, and implements a regression discontinuity design to estimate the effect of living in such norm-minority families on conformity. The second essay studies costs in adjusting taxable income, using tax reforms and data from the Republic of Cyprus. Combining reduced-form evidence with a structural model of labour supply, it estimates these costs at CYP 79 for salary earners, and CYP 5 for the self-employed (the equivalent of 135 and 8.5 Euros respectively). It then examines the mechanisms driving the observed responses, and proposes a method that estimates asymmetries in adjustment costs to infer the underlying source of frictions. Using the same data, the third chapter examines the importance of tax policy design for tax enforcement and behavioural responses in charitable contributions. It shows three sets of results. First, exploiting salary-dependent thresholds for third-party reporting of charitable contributions, it estimates that reported donations increase by about 0.7 pounds when taxpayers can claim 1 pound more without providing documentation. Second, it finds that at least 40 percent of these observed responses are purely due to changes in reporting, using a reform that retroactively shifted the reporting threshold. Last, it estimates a tax price elasticity of reported charitable donations at -0.5, and shows that this policy parameter is highly sensitive to the reporting environment.

I present three essays in this thesis. The first essay provides novel empirical evidence on the evolution of the incentive cost of unemployment benefits during an unemployment spell. Theoretical arguments have been proposed for both inclining and declining benefit profiles. However, empirical evidence on how the incentive cost of unemployment benefits may vary over the spell, which is a key input in evaluating the time profile of benefits, is limited and mixed. I estimate the incentive cost of benefits paid at various points during an unemployment spell and find that the elasticity of unemployment duration with respect to benefits and the incentive cost of UI are smaller for benefits paid later in the spell. I argue that the decline in incentive costs is driven by partially myopic job-search behaviour and non-stationarities in the dynamics of job search. The second essay provides quasi-experimental evidence of the short-term and long-term effects of fiscal stimulus programs in the UK housing and auto markets. In an influential work Mian and Sufi (2012) argue that such temporary incentives are ineffective in boosting market activity in the long-term. I show that a temporary tax cut in UK housing market has had considerable long-term effects. I argue, using a dynamic search model with frictions, that the magnitude of the long-term effect of a stimulus is directly related to its duration. The third essay shows that frequent repayment can act as a screening device in micro-lending under individual liability. A tight repayment schedule can be used to screen out ”risky” borrowers. Borrowers with more volatile profits would prefer contracts with higher interest rate but more flexible repayment schedule, while ”safe” borrowers can afford to repay more frequently. I show that frequent repayment can be used to design a menu of contracts that achieves a separating equilibrium.

This dissertation consists of three essays in the intersection of macroeconomics and international trade. The first essay studies the causes and consequences of the differences in the use of outsourcing across countries. I start by observing that there is considerable variation in outsourcing intensity across countries. I then show that this pattern can be rationalized in a theoretical framework that combines a Coase-Williamson view of the firm with Kiyotaki-Moore-Manova view of financial friction. The model pins down the intensity of outsourcing and shows how it varies with the financial characteristics of the suppliers. Econometric evidence reveals that the model is consistent with the features of both sectorallevel and firm-level data. The model also clarifies two conflicting mechanisms of outsourcing on productivity. Quantitative analysis reveals that both mechanisms are quantitatively significant so that the net effect on aggregate productivity is modest. My study implies that outsourcing is unlikely a significant source of cross-country differences in productivity. In the second essay, I examine how heterogeneous market power affects the quantification of resources misallocation within sector. I extend the Hsieh-Klenow framework of misallocation to allow for heterogeneous market power and use the model to study the impact of resources misallocation on India’s aggregate productivity. Quantitative results show that heterogeneous market power has a large impact on the quantification of misallocation. In particular, in the presence of heterogeneous market power, the impact of tax-related distortions on aggregate productivity is about one-seventh of the effect found by previous literature. My study implies that increasing market competition is an effective way to reduce market power and enhance aggregate productivity. The third essay studies how factors of different quality are allocated to the production chain. The essay starts by unveiling two systematic patterns in factor inputs and factor rewards along production chains. I then show that these patterns can be rationalized in a theoretical framework with heterogeneous factors. In the model, products become increasingly complex as they move along the production chain. Downstream firms hire skilled workers to process complex products. To the extent that skill is strongly complementary to the quality of physical capital, downstream firms also employ high quality capital goods. The analysis sheds light on the organization of factors along production chains.

This thesis consists of three chapters that belong to the realm of Applied Microeconomics. The first two chapters are empirical projects that assess the role of time for human capital development of immigrants in the U.S. The third one is a theory project that studies how managerial career concerns and experimentation influence risk-taking behaviours. Chapter 1 studies how age at arrival in the U.S. affects the skill development of young immigrants in the U.S. Using the within family variation across siblings entered in the U.S. at different ages, I document a cognitive/non-cognitive tradeoff induced by age at arrival. As for cognitive skills, the effect of age at arrival is negative, in particular for the ability to learn English. The effect on cognitive skills is reflected in immigrants’ educational achievements. However, age at arrival plays a positive role for illicit behaviours. Children of immigrants arrived later tend to show less problematic behaviours than their siblings arrived earlier, also controlling for their English ability. Through an indirect accounting exercise, I estimate the negative effect of age at arrival on the labor market performance of immigrant adults. I conclude the paper showing that more educated parents anticipate the arrival of their children in the U.S. Chapter 2, co-authored with Leonardo Felli, Carola Frege and Yona Rubinstein, studies the intergenerational assimilation of immigrants in the U.S. In our study, we observe the outcomes of several immigrant generations. Moreover, we link immigrant mothers and their children, thus observing the outcomes of two immigrant generations belonging to the same cohort. Controlling for the selection into migration and return migration, we document that it takes two immigrant generations to exhaust the full potential of cognitive and educational assimilation, while it might take longer for other social outcomes, such as the attitude towards problematic behaviour and the likelihood of having children. Chapter 3, co-authored with Francesco Sannino, studies the effect of managerial career concerns and experimentation on risk-taking. We model an economy where managers create value through their ability to learn at an intermediate stage about the intrinsic profitability of a risky investment. Managers are heterogeneous in their ability to extract information from experiments, and care about their reputation. Their incentive to take on risk is distorted by career concerns, and can result in under or over risk-taking. When, following the experiment, better managers discard risky projects more often than bad ones we observe over risk-taking. Our result is in contrast with Holmstr ̈om (1999) where managers’ ability affects the project’s success rate, and career concerns can only produce inefficiently low risk-taking. We show that the inefficiency is reduced in one extension of the model, where the market can also observe the outcome of similar projects. The novel implication is that markets more plagued by career concerns distortions are those where managers engage in more idiosyncratic activities.

Many contributions to economic theory may be broadly classified as microeconomic or macroeconomic, by which it is meant that they are concerned with questions about the behaviour of rational individual agents in the case of microeconomics or large aggregates in the case of macroeconomics. It would seem reasonable to expect that the results obtained by studying the aggregates should in some sense be compatible with adding up of the behaviour of the individuals which comprise those aggregates. That micro theory and macro theory should at least not be contradictory. On a simple level this may not appear to be the case. Consider the General Equilibrium model originating from the work of Arrow-Debreu and the standard 'elasticity pessimism' IS/LM representation of Keynesian economics to be the paradigms of micro and macro respectively. It may appear that these two models are in conflict, the general equilibrium model assumes that prices clear markets, such phenomena as unemployment can only arise by the individual choice of the agents concerned, all unemployment is voluntary. One of the crucial features of Keynesian macroeconomic models is the presence of involuntary unemployment. To present these models in this light is to deliberately misinterpret the questions which they are addressing. The basic question to which general equilibrium addresses itself is in the words of Weintraub (1979, p. 75): "how (might) it (be) possible for a decentralised individualistic system, operating on principles of self-interest, to produce coherent or co-ordinated outcomes (of the economic system)?

This thesis is a collection of three individual works on dynamic economic decision problems which go beyond expected utility maximisation in complete markets. The first chapter introduces an asset liquidation model under prospect theory preferences. We demonstrate that the probability weighting component of the model can predict liquidation strategies which better fit the empirical patterns of investors’ stock trading behaviours, when compared to models which do not incorporate probability weighting. The second chapter explores the role of randomised strategies in an exit-timing problem faced by a prospect theory agent. Several new insights are offered: in a discrete model, access to randomisation can strictly improve the economic value to the agent; in a continuous time counterpart, allowing randomisation will significantly alter the prediction of an agent’s behaviours and more realistic exit-strategies would be observed in contrast to the results from the existing literature. The final chapter studies an extension to the Merton’s optimal investment and consumption problem under transaction costs, where the agent can also dynamically invest in a liquid hedging asset without a trading fee. We provide a complete solution. Important properties of the problem such as well-posedness conditions and comparative static results are derived.

The aim of this thesis is to assess the role of the state in economic development in the GCC countries. Three aspects of this subject are investigated. An Indirect role of the state is analyzed through the effect of financial development on the economic growth. And direct roles of the state are examined through the impact of defence spending and that of public infrastructure on the development process. First the role of financial development is analyzed by using three alterative causality tests. The results suggest that the existence of long-run relationship between economic development and the state of financial development in most GCC countries. The results further suggest that financial sector can be a leading sector for some of the GCC countries. Second, the impact of defence spending on economic development is examined by employing VAR/ECM models. The emerging results suggest that defence expenditure appears to retard economic development for countries with relatively heavy defence expenditure (Saudi Arabia and UAE), whilst positive effect is suggested for GCC member with relatively low defence spending (Bahrain and Oman). Third, for one member of GCC (Saudi Arabia) the role of public infrastructure in economic development is analyzed also using VAR/ECM. The results indicate that the high public capital expenditure in Saudi Arabia has insignificant effect in the economic development in the long – run.