This research makes a contribution to knowledge by testing Granovetter’s (1973) theory of the strength of weak ties in microfinance based on an empirical study in India. Specifically, it looks to test if the addition of weak bridging ties to the networks of microfinance clients who own businesses will improve their businesses and help to reduce their poverty. This research also investigates Burt’s theories on structural holes (1992), brokerage and closure(2005) and network spillover (2010) can assist with the building of weak bridging ties. Microfinance is the delivery of financial services to the poor which includes credit, savings, insurance and remittances. The original goal of microfinance is to do financially sustainable poverty reduction. The key issue for microfinance is that it has not achieved levels of poverty reduction envisioned when the modern microfinance started. One reason for this is that microfinance clients start businesses with low barriers to entry which makes them very susceptible to competition. Also, the poor tend to inhabit fragmented social networks with few ties outside it that would bring needed information on markets, finance, suppliers, customers and the competition that would help to improve their businesses. Network analysis provides, with theory of the strength of weak ties, an approach that will give poor people access to information need by them to improve their businesses. India is one of the largest microfinance markets in the world which also has a unique form of microfinance. In addition to individual lending and joint liability groups, India has self-help groups which are essentially microbanks owned and operated by its members. Sari sellers, who happen to be members of self- help groups, are good example of a low barrier to entry business. Using a variation of the method developed by Kahn and Antonucci (1980), sari sellers were asked to identify the people they were connected to for supplies, finance, market information and customers. These are placed on a target diagram indicating how close these are to the sari seller who is at the centre of the target. Lines connecting the alters who know each other are drawn. In addition, a network intervention was conducted in attempt to introduce weak bridging ties into the social networks of the sari sellers. A simple method of providing sari sellers in the treatment group a list of other sari sellers they could contact for help while those in the control group did not receive the list. Several interesting findings came out of this research. Analysis of the sari sellers’ ego networks shows that there is a reliance on strong ties which confirms Granovetter’s (1983) argument. The analysis of the ego networks also show the sari sellers do have access to structural holes but do not take advantage of these. When the ego networks are combined using their contacts with the microfinance institution’s staff, analysis shows that the resulting network has a parent-subsidiary structure which reflects the hierarchical nature of Indian society. Finally, the analysis also shows that this network is fragmentary and fragile. Weak bridging ties would make the full network less fragile and allow the sari sellers to take advantage of the structural holes they find. This is what the intervention is attempting to do. While the intervention did not go as planned, evidence was found to support the hypothesis that addition of weak bridging ties to the social networks of sari sellers improved their businesses. A group of 15 disparate sari sellers created weak bridging ties to take advantage of one of the sari seller’s contacts to buy saris in bulk. Another sari seller saw a significant increase in sales for Diwali 2011 because a new member of her social network created a weak bridging tie which introduced her to many new customers.

What are the main causes of bank failure? This thesis contributes to answering this question by focusing on the city of Chicago during the Great Depression, which experienced one of the country’s highest urban bank failure rates. Focusing on the long-term evolution of state banks’ balance sheets, it finds that what greatly mattered for their survival was the inherent liquidity of their pre-Depression portfolios. Indeed, all banks, including survivors, suffered tremendous deposit withdrawals. Yet those that ended up failing could be identified as weak ex ante. Such weaknesses were linked to the inherent liquidity of their portfolios: the higher their amount of long-term illiquid assets (in particular, mortgages) before the Depression started, the more likely they were to fail ex post. The first paper identifies mortgage holdings as the most important predictor of bank failure, and explains how their intrinsic lack of liquidity came to matter more than their low quality. The second paper zooms in on mortgage contracts themselves, and finds that debt dilution due to the “second mortgage system” led to a lower probability of repayment. Nevertheless, this second paper shows that increased default rates affected banks only insofar as foreclosure was a long drawn-out process that lasted more than eighteen months in Illinois – a great impediment to bank survival in case of a liquidity crisis. The third paper asks whether mortgage securitization would have solved the liquidity issue, and uncovers the extent of actual securitization taking place at the time in Chicago. However unbinding commitments and the lack of a regulated exchange created inefficiencies not unlike those of today. Together these results reassert banks’ responsibility in liquidity risk management. While credit risk continues to be an essential feature of banking, and has been recognized as such, renewed attention needs to be paid to the ways in which banks manage the inherent liquidity of their portfolios.

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.

What accounts for the differences in the economic performance across Italian regions in the post-Unification period? This thesis seeks to explain the regional patterns of economic development and industrialization in Italy in the period 1871-1911 by applying various Economic Geography models. The first part follows Overman and Puga (2002) and studies the distribution of industrial employment across regions. The aim is to test the effect of regional borders on the distribution of industrial employment. The existence of this border effect, tested through the use of provincial data, suggests that the Italian regions in this period represented meaningful economic entities. By testing the effect of pre-1861 borders we link this result to the persistence of pre-Unification institutional arrangements. The second part follows the methodology by Head and Mayer (2011) and investigates the relationship between economic performance and market access. Here market access is captured through market potential, a measure of the centrality of a region based on GDP and transport costs. The main result is that domestic market potential is a strong determinant of GDP per capita while all the formulations of market potential that include trading partners give more mixed results. The last part seeks to explain the location of industries in Italy in the period 1871–1911. The analytical framework takes into account both the Heckscher-Ohlin (H-O) theory on factor endowment and the New Economic Geography (NEG) theory on access to markets. The methodology used here is based on Midelfart-Knarvik et al. (2000). The location of industries, measured through employment per region per sector, is explained with interactions between characteristics of the regions and characteristics of the sectors, of both H-O and NEG-type. The main findings of this chapter are that endowments, and in particular human capital, were the driving force behind the first Italian industrialization while access to markets had a more limited effect.

This dissertation examines the extent to which proximity to markets - as measured by market potential, the trade cost-weighted sum of surrounding regions’ GDP - can explain late-nineteenth century Europe’s regional per capita income differentials. The research questions are: (1) was the spatial distribution of regional income random; (2) how helpful are traditional explanations - coal and institutions - of regional income; (3) how helpful is market potential when controlling for traditional explanations; and (4) did market potential have an effect on other determinants of income? This dissertation finds that: (1) the distribution of regional per capita income increasingly concentrated in the northwest; that there was little tendency to income convergence; and regional inequalities were higher within than between countries; (2) while a measure of regional institutions is correlated with income, simple distance-to-coal and a cost-to-coal measures are not; (3) market potential has a significant effect on income; foreign market potential more so than domestic; and increasing core relative to peripheral market potential results in perpherial income losses; and (4) changes in literacy rates, a proxy for human capital, responded to changes in market potential. In conclusion, a new economic geography framework with market potential at its core fits the historical experience well. Certain regions performed better than others generally because they had cheaper access to markets. At the start of the period, trade costs were high, and so economic activity - long concentrated in Britain - was spread out more or less evenly across the Continent. By the end of the period, when trade costs dropped dramatically, economic activity concentrated in the northwest of Europe at the cost of the periphery.

The paradox of China’s failure to industrialize despite its thriving commercialization before the 19th century has been debated intensively, especially in terms of whether market efficiency is sufficient for industrialization in the pre-modern period. This thesis sheds light on this question using archival data on grain prices covering Qing China’s most prosperous episode (1740-1820) to identify the determinants of market evolution as well as the true extent of market integration. My results suggest that China’s market efficiency on the eve of Western industrialization has been grossly overstated, and further imply that China’s market was heavily influenced by its bureaucratic structure. My analysis is based on a historical dataset of monthly grain prices (rice, wheat) in 211 prefectures across China and I match these with new data on the physical geography of the postal and river network and physiographic distribution. My analysis first confirms the close relationship between market integration and geographic proximity but shows that geographical influence is dominated by provincial boundaries. I then employ novel panel time series methods to account for the impact of local and global shocks and to investigate the evolving process of market integration over time. This analysis indicates that China experienced continuous market disintegration with fragmentation driven by political structure. These results support my hypothesis that Qing China’s political system was not conducive to the development of the market mechanism since its primary concern was market regulation rather than revenue.

While confronting the question of aid effectiveness, an important issue (but often ignored) in the context of a developing country like Uganda is which GDP measure would be most reliable as this is crucial for measuring the macroeconomic impact of aid. The most commonly used GDP measure in the aid-growth literature is typically from World Development Indicators (WDI) or Penn World Tables (PWT) (being considered the most reliable or the easiest to obtain). However, disparities in GDP from alternative sources are common and in practice one has different estimates of the level, change and growth of GDP for the same country over the same period. This is of a particular concern especially in developing countries (without exception) where the informal and subsistence sectors are a large share of the economy (Jerven, 2010) and where not all transactions in the formal sector are recorded (MacGaffey, 1991), and the quality of data is still very poor and measurement perceptions of macroeconomic aggregates are varied and weak (Mukherjee, White and Wuyts, 1998). Because the source chosen for GDP may affect inferences on growth and economic performance for African countries, the thesis entry point was an analysis of alternative sources of GDP, and aimed to construct a consistent GDP series for Uganda. The extent of discrepancy in GDP estimates was investigated, and the year on year percentage GDP growth rates, including percentage and average growth rate discrepancies were derived, with a particular focus on sub-periods when GDP from alternative sources diverge most. Although UBOS and WDI real UGX GDP year on year growth rate estimates had a 3.6 percentage point average absolute discrepancy per year, they are consistent, similar and cointegrated. In fact, over 1970-76 and 2000-08 the two series are very close, and they are quite close for 1978-83 and 1993-99. Therefore, either series can be considered to represent trends in the size of the macroeconomy. However, the UBOS real series is smoother and produces a more stable measure of GDP than does the WDI series and it is the underlying source from which macroeconomic data is sought by the international agencies, including WDI. Given this, the less volatile UBOS real series (real UGX GDP/U) was preferred especially as there was less need to incorporate dummies in the rest of the thesis. Fiscal data and private consumption (our preferred measure of growth) in the thesis were derived from this same source. Two dynamics relationships, i.e. one between foreign aid and domestic fiscal variables, and the other between foreign aid, domestic fiscal variables, exports and private consumption in Uganda are assessed using annual data over the period 1972 to 2008. ACVAR model is employed and executed using CATS in RATS, version 2.1and E-views 7.2. Features of the data over 1972-79, a period characterized by political and economic instability in Uganda and the effect of policy shift due to structural adjustment programme and the Museveni regime in Uganda are reflected in the analysis. Considering first the core fiscal variables, we find that aid and fiscal variables form a long-run stationary relation and the role of structural changes remain unclear as the policy shift dummy seems unimportant for the long-run fiscal relation. A test of structural links between aid and fiscal variables reveals that aid is a significant element of long-run fiscal equilibrium, and the hypothesis of aid exogeneity is not statistically supported. In the long-run, aid is associated with increased tax effort, reduced domestic borrowing and increased public spending, although aid additionality/illusion hypothesis remains inconclusive given the nature of the DAC measure of aid used here. A decomposition of the common trends shows that shocks to tax revenue are the pulling forces, while empirical shocks to domestic borrowing, government spending and aid are the pushing forces of the fiscal system. In terms of policy, it is crucial for the donors to increase the reliability and predictability of aid in order for Uganda to improve fiscal planning and reduce the need to resort to costly domestic borrowing. In addition, one way to make inference on the relationship between aid and spending more clear is for donors to coordinate aid delivery systems and also make aid more transparent. Finally, we extended the fiscal analysis and also considered how aid, mediated by the fiscal variables, and exports impact on the growth of the private sector- a relationship a kin to the growth response to aid in Uganda. Results show that aid and the Ugandan macrovariables are significantly cointegrated, and a battery of sensitivity and robust checks demonstrate that the cointegration rank is 2. These are formally identified as representing respectively the statistical analogue of the budgetary equilibrium among the core fiscal variables and the link between aid, fiscal variables, exports and growth in private consumption. Using this rank condition, the hypotheses of long-run exclusion of aid and aid exogeneity are optimally tested within a system of equations, but these are not statistically supported. With particular reference to the growth relation, we find broad support that aid has had, in the long-run, a positive impact on the private sector, albeit indirectly through public spending, and deficit financing is associated with ‘crowd in’ effect linked to public investment spending. However, the belief that ‘earmarking’ aid to investment spending contributes to achieving target growth rates may be exaggerated. It is the productivity, not the level of investment that matter. On the contrary, aid may have an important role in supporting consumption spending, and this happens to be more beneficial to growth in Uganda than may be commonly acknowledged. The role of structural changes remains unclear as the policy shift dummy seems unimportant for the long-run fiscal and growth relations, but may matter for the short-run.

The transition of U.S. economy, from a large primary products exporter based on abundant endowments of natural resources to a leading industrial producer and a successful manufacturing exporter from the late 19th century to the early twentieth century, is a remarkable historical event. In this thesis I investigate the quantitative importance of various factors and policies behind the development of the U.S. and the North Atlantic economy from 1870 to 1913. The factors considered are exogenous changes in : sectoral productivities; endowments in labour and land; and trade costs. While these may not be all the factors that mattered, they were certainly important forces behind the development of the region. I then ask some historically interesting counterfactual questions which are closely related to these forces. First, I explore the implications of the high tariffs imposed on U.S. manufacturing imports. More particularly, I ask "Could U.S. manufacturing and its economy grow as it did without the tariffs?" The second counterfactual exercise is related to the mass migration. There is no doubt that the mass immigration to the U.S. in the nineteenth century contributed considerably to its overall economic growth. But what is uncertain is its quantitative implications on the overall and the sectoral development. I also look at its implications on the Anglo-American real wage convergence. The focus is on several dimensions of the development : the large increase in U.S. share of world manufacturing output and the decline in that of Britain; the growth of their primary and manufacturing output and real GDP; and its structural transformation. In order to disentangle the effects of each force, I build a model of the North Atlantic economy calibrated to be consistent with some key facts during this period.

In Kenya, like in many other countries around the world, private equity’s emergence as a creative method for financing companies, is attracting attention as the government seeks new ways of financing its private sector – which it now recognises as the engine for Kenya’s economic development. This policy outlook is undermined by the reality of a yet extensively undercapitalised private sector, and the lack of a coherent body of knowledge and experience on Kenyan private equity. This study, for the first time, brings together that dispersed body of knowledge to facilitate coherent analysis of the emerging legal and institutional issues that private equity introduces. Using case law and statutory analysis, documentary reviews, interviews and surveys to construct the complete picture of Kenyan private equity, this empirical legal inquiry finds that the law on private equity in Kenya is incomplete: it is patchy and dispersed, and is not uniformly applied among and across all private equity market intermediaries. Secondly, the institutions charged with supervising the implementation of the law are undercapacitated, with the result that regulatory supervision within the private equity industry remains weak and largely unfelt. Thirdly, the legal institutions supporting private equity practice in Kenya (security of property rights, security of financial contracts and integrity in financial reporting) are in a nascent state of development. Fourthly, there is no clear policy on alternative investments generally, and private equity particularly, in Kenya, undermining precision in regulatory objectives. These realities combine to blunt the impact of private equity in driving creative entrepreneurship. These realities support the need for structured national capacity enhancement across all spheres of private equity practice, such as would strengthen regulatory supervision, the emergence of a ‘home brand’ to private equity, the increased visibility of structured government engagement in channelling private equity into economically productive sectors linked to the nation’s development strategy. These findings mirror earlier research investigating the under-performance of private equity in emerging markets, with the upshot that a Law and Institutional Growth Model for Private Equity in Kenya is the necessary catalyst that will trigger the rapid expansion of the Kenyan private equity industry in aid of national development.

This thesis explores the macro-economic history of Cyprus and Malta in the inter-war period. It constructs the first detailed estimates of output at aggregate and sector levels, enabling the analysis of economic growth and the sector structure of the islands‟ economies. It evaluates their performance within the context of economic change on Europe‟s South Eastern periphery and, specifically, in light of the experience of British colonial rule. The thesis argues, first, that economic growth was slow in wider European comparison and as sluggish as in neighbouring countries. It was so despite the two islands' being far less exposed to the political upheavals of the First World War than most other economies in South Eastern Europe. Second, the proximate reasons for their comparatively weak growth performance differed: Cyprus experienced a prolonged agricultural crisis, but participated in the post-depression recovery through the growth in international demand for the output of its copper mining industry. Malta‟s growth was slower than Cyprus due to the combination of declining British military expenditure and the population increasing faster than previously. These differences notwithstanding, the islands were ultimately affected by common problems. Their small overall size had a negative effect on their performance as global protectionism increased and restricted export opportunities. In addition, the colonial governments remained committed to balanced budgets and non-intervention in the economy, limiting their ability to combat the effects of the great depression. As a result, the deteriorating economic situation increased the political tension between the islanders and the colonial governments. The reluctance to mount an effective policy response to the great depression acted as a catalyst to political polarization, leading to violence and the suspension of the islands‟ constitutions.