My research seeks to understand the behaviour of workers and firms and how their decisions affect labour market outcomes. My PhD dissertation consists of three separate Chapters that use detailed historical, census and administrative data to gain insights into the mechanisms at play when incentives for production and location decisions change. Chapter 1 asks whether financial incentives can induce inventors to innovate more. I exploit a large reduction in the patent fee in the United Kingdom in 1884 to distinguish between its effect on increased efforts to invent, and a decrease in patent quality due to a lower quality threshold. For this analysis I create a detailed new dataset of 54,000 British inventors with renewal information for each patent. In the longer run high-quality patenting increases by over 100 percent, and the share of new patents due to greater effort accounts for three quarters of the pre-reform share of high-quality patents. To test for the presence of credit constraints I generate two wealth proxies from inventor names and addresses, and find a larger innovation response for inventors with lower wealth. These results indicate efficiency gains from decreasing the cost of inventing and in addition, from relaxing credit constraints. In Chapter 2 we assess the effects of changes in ethnic neighbourhood composition in England and Wales. A change in social housing allocations in the 1990s serves as instrument for changes in the local ethnic composition. For the analysis we create a dataset of highly disaggregated census geographies for 1991-2011. The results imply that an exogenous increase in social housing minority share by 10 percentage points raises the minority share in private housing by 1.2 percentage points initially. This sorting effect is larger for privately rented than for privately owned housing. We further show that an increase in the minority share leads to higher local population growth and a small decrease in house prices in the longer run. Chapter 3 proposes a new approach for analysing responses to comprehensive labour market reforms. Using detailed micro data we evaluate the German Hartz reforms that aimed at reducing unemployment. The timing of the reforms affects the model parameters, which are estimated using matched data on 430,000 workers in 340,000 firms. Contrary to previous findings, our analysis shows that the reforms marginally reduced unemployment at the cost of a pronounced decline in wages. Low-skilled workers suffered the largest wage losses. Furthermore, we decompose the contribution of each reform wave on employment and wages, and document a structural shift in the factors that govern overall wage dispersion.

Innovation incentives are imperfectly provided in market settings: When deciding on their innovation activity, firms tend to focus on the maximization of their private benefits, poorly internalizing social benefits. This thesis analyzes how policy intervention could be designed in order to align private and social incentives. <p><p>In the three papers of this thesis, I will consider three environments where firms' choices in a laissez-faire situation may be socially inefficient. The inefficiencies arise because of learning externalities, free riding when the innovation decision is made by a group of participants, or because firms are not willing to invest in a new activity that has a higher social than private value.<p><p>In the first thesis paper, I deal with the strategies of firms in innovative consumer product markets characterized by demand uncertainty. I analyze the timing and location decision of firms in that context.<p><p>In the second thesis paper, I consider the investment incentives of financial market infrastructures (FMIs). FMIs comprise the set of institutions that allow financial market participants to engage with each other. I assess the innovation incentives for different forms of ownership (user-owned versus third-party owned) and identify infrastructure service provision equilibria. <p><p>In the third thesis paper, I address the question of how a government should allocate a subsidy budget over time in order to maximize the innovation activity in an industry. / Doctorat en Sciences économiques et de gestion / info:eu-repo/semantics/nonPublished