Credit has proven to be a necessary tool for economic development affecting positively the welfare of households and individuals. However, one major area in which rural households lack is access to financial markets including credit. The studies included in this thesis contribute to the access to credit literature and the credit constraint/unconstraint impact on some welfare outcomes. The first empirical study examined farm households' access to credit in rural Malawi. Unlike previous empirical studies, particular attention is given to discouraged borrowers who are mostly ignored in such studies. Using the 2010/2011 household survey data from Malawi the study determines the demographic and socio-economic characteristics that distinguish farm households who need credit, who are the discouraged borrowers and who are rejected applicants. A three-step sequential estimation model following a trivariate probit model with double sample selection was adopted. The findings revealed that there were over 7 times more discouraged borrowers than denied applicants. Women were more likely to be discouraged from applying for credit but, if they applied, they were more likely to be successful in obtaining credit than males. This shows that when examining farm households' access to credit discouraged borrowers should be given special consideration. Capturing discouraged borrowers as also credit constrained, the second empirical study employed a switching model to estimate the impact of credit constraint status on farm productivity for each credit constraint regime. The study further compared the expected production under actual and counterfactual conditions for a household being credit constrained or unconstrained. The findings suggest that a household that is constrained is less productive than a randomly selected household from the sample would but that for the unconstrained household is inconclusive, however, the counterfactual arguments as seen from the analysis shows that being credit unconstrained was beneficial to the increase in productivity. Studies have shown that undeveloped financial markets have been a major contributing factor increasing inequality, especially in developing countries. The third empirical study examined the impact of household credit constraint on the consumption inequality of rural households in Malawi. Factors that explain the within and between credit constrained and unconstrained status of consumption inequality were examined. The General Entropy (GE) Index and the Regression-Based Inequality Decomposition Methods, Field's (2003) and Blinder-Oaxaca Decomposition were employed. The findings show that inequality was more prominent within the groups than between them. Also, the size of households and the value of assets were the major contributors to the within-group inequalities for credit constrained and unconstrained households. Further, only the endowment component was important in explaining the consumption inequality gap between the credit constrained and unconstrained households. Adjusting the level of endowments of constrained households to that of the unconstrained households increased their welfare by 15.7 percent.

In 1997 the Saudi Government took a forward step to implement privatisation and to promote the process and its implementation in different public enterprises. They issued various resolutions and decisions for implementing and managing the programme but the process is moving slowly and rate of the implementation is limited. Implementation of privatisation is related to several matters, such as condition of the enterprise, content of the privatisation strategy, etc. This research concentrates on investigation and analysis of the privatisation programme in Saudi Arabia, with particular reference to the process of managing and implementing the programme. The main objectives of the study are: (1) to establish the reasons for the delay in implementing; (2) to investigate the barriers hindering the process in several enterprises and the level at which these barriers are hindering the programme; (3) to develop an "Efficient Models" to help the Government in smooth implementation of the programme. The research uses the literature review, survey opinions of a group of the public and private sector managers and various case studies as sources of data for the research. The methodology of the study evaluates whether the barriers to implement the programme in the country lie at the privatisation strategy level or at the enterprise level. It includes investigation of the barriers hindering of the programme, development of a main model and the other models based on analysis of the international experiences and their comparison with the actual implementation of the programme at Saudi Arabia. This study is designed to fill the gap in knowledge about planning and managing privatisation and monitoring the process of implementation. The study develops an "Efficient Models" which makes managing the process clear for all the organizations involved in the process. These models are allowing the Saudi government to implement, manage and monitor the privatisation strategy, employees' matters, restructuring and regulation policy.

<p> This research empirically examines whether tourism industry efforts, as well as that industry&rsquo;s performance determinants, overlap with the determinants that promote retirees&rsquo; flow from more economically developed countries (MEDC) to Caribbean and Central American (CC) destinations. Additionally, this study explores the effects of CC governments&rsquo; retirement incentive programs (a supply-side factor) in attracting MEDCretirees. While the Caribbean countries have traditionally taken the lead in the tourism industry, Central American countries now are taking the lead with constructing attractive retirement packages. </p><p> The multiple regression results provide strong empirical evidence that government retirement incentive programs (GRIPs) hold significance in predicting MEDC- migrant stock at CC destinations and the attached capital flows (savings and social security retirement wealth). This study also provides evidence that international tourists flow with MEDC-migrant stock of retirees to the CC region.</p><p>

This work presented in this thesis aims to provide a better understanding of how agents respond to policy incentives to encourage energy efficiency improvements. First of all, the way agents respond to policy incentives crucially depends on heterogeneity in characteristics determining their responsiveness to taxes and subsidies. Second, agents’ heterogeneous responses to policy can undermine the cost-effectiveness of subsidies. Third, under conditions where the policy targeting is poor or agents are not very responsive to the traditional market-based instruments other policy instruments based on information provision or nudges may be more effective. I propose a theoretical model on optimal tax and subsidy combinations to correct externalities from energy consumption and underinvestment in energy efficient technologies. I show that when agents misperceive their true energy efficiency, the targeting efficiency of policies based on subsidies is poor and consumers selection into adoption is adverse. Adverse selection arises because those more likely to adopt consume less energy and overvalue the benefit from adoption. In the second chapter, I present a discussion on energy policies in the United Kingdom and analyse the energy consumption and energy efficiency measures adoption patterns using data for households in England and Wales. This sets the stage for Chapter 3, where I present an empirical study to test whether selection into adoption is adverse or not. I find that early technology adopters consume more energy before adoption and experience higher energy consumption drops upon adoption. Thus, supporting the idea that consumers’ heterogeneity plays a major role to explain the observed adoption patterns. The results suggest that adoption decisions are driven by heterogeneity in preferences rather than heterogeneity in beliefs. Hence, overall selection is not adverse and this suggests the role of misperceptions is dominated by the effect of preferences heterogeneity. This does not preclude, however, that biased beliefs may have a role at determining the adoption patterns and responses to policy interventions.

In Chapter 1, a theory of optimal fund size in venture capital is developed. Fund managers - the VCs - add value to the projects they finance, but their human capital is scarce. A matching model is proposed where VCs span their nurturing activity over more projects, and entrepreneurs, who own the projects, direct their search to VCs based on their projects’ quality. The work provides necessary and sufficient conditions for positive and negative assortative matching over VC attention and project quality to emerge and shows when VCs fundraising decision is distorted by selection considerations. The chapter ends with an investigation of the effects of entry of less skilled intermediaries. By attracting the worse entrepreneurs, these new agents alleviate the adverse selection problem associated to managing a larger fund. This offers a new angle to think about policies encouraging entry in the venture capital industry. In Chapter 2, the model developed in Chapter 1 is extended to a dynamic setting, where projects need time to develop and produce returns. VCs can choose to enter in a short-term contract with investors, giving them access to investors liquidity for a given period of time, and an open credit relationship that allows them to raise investors money at any point in time. The model illustrates a novel advantage of closed, finite-horizon funds, which emerge in equilibrium even when they are socially undesirable: they attract the best entrepreneurs, who value the most the exclusive relationship that only a closed-end fund can guarantee. The interpretation is that VCs benefit from committing to a size in the first place. In Chapter 3, the focus moves to the study of the distortions in fund managers’ behavior that may occur within a fund’s life. A setting is introduced where information about a manager’s ability is imperfect and managers are interested in their reputation. Given the application to investments in young firms, managers in the model are agents that create value because they can experiment and learn about a projects potential. Their incentive to take on risk is distorted by career concerns, and can result in under or over risk-taking. The result contrasts with Holmstrom (1999) where managers directly affect the project’s success rate, and career concerns can only produce inefficiently low risk-taking. It is shown that the inefficiency is reduced when the market can also observe the outcome of projects with the same fundamental.

This thesis studies the interaction between the financial sector and the real economy. Chapter 1 analyzes how lending cuts by banks affect firms. I identify an exogenous lending cut by a large German bank and examine the growth of firms and counties dependent on this bank. Firms directly exposed to reduced bank lending grew more slowly. On average, firms suffered when many other firms in their county experienced decreased bank lending, because of lower aggregate demand and agglomeration spillovers. The effects of the lending cut persisted after lending had resumed. Innovation and productivity fell, consistent with the persistent effects. Chapter 2 investigates the effect of house prices on household borrowing using administrative mortgage data from the UK. The chapter develops an empirical approach that exploits individual house price variation coming from the timing of refinancing events around the Great Recession. There is a clear and robust effect of house prices on borrowing. The effect can largely be explained by households using the value of their house as collateral. Chapter 3 focuses on financial institutions. How changes in bank size affect the real economy is an important question in the design of financial regulation. This chapter studies a natural experiment from postwar West Germany. Reforms by the Allied occupiers led to increases in the size of a number of banks. I estimate the effect of increased bank size on the growth of firms. The results suggest that firms did not benefit when their banks became larger. The findings are inconsistent with theories that argue the real economy benefits from increases in bank size. There is evidence that big banks are worse at processing soft information and take more risks. Big banks receive more mentions in the media, which could be an incentive for banks to become big.

This thesis contains two theoretical essays on reciprocity and one that analyzes the effects of perception biases on learning and decision-making. In the first chapter, I propose a new theory of intention-based reciprocity that addresses the question of when a mutually beneficial action is kind. When both benefit from the action, a player’s motive is unclear: he may be perceived as kind for improving the other player’s payoff, or as self-interested and not-kind for improving his own. I use trust as an intuitive mechanism to solve this ambiguity. Whenever a player puts himself in a vulnerable position by taking such an action, he can be perceived as kind. In contrast, if this action makes him better off than his alternative actions do, even if it is met by the most selfish response, he cannot be kind. My model explains why papers in the literature fail to find (much) positive reciprocity when players can reward and punish. The second chapter extends my theory of reciprocity to incomplete information. I outline how reciprocity can give rise to pay-what-you-want pricing schemes. In the classic bilateral trade setting, I show that sequential interactions can be more efficient than normal form mechanisms when some people are motivated by reciprocity. Reciprocity creates incentives for information sharing. The last chapter is co-authored with Manuel Staab. We study the effects of perception biases and incorrect priors on learning behavior, and the welfare ranking of information experiments. We find that both types of biases by themselves reduce expected utility in a model where payoff relevant actions also generate informative signals, i.e. when actions constitute information experiments. However, experiments can be affected to different degrees by these biases. We provide necessary and sufficient conditions for when any binary ranking of action profiles can be reversed. Building on these findings, we show that an agent can be better off suffering from both biases rather than just one.

This thesis proposes a comprehensive framework that allows analysis of preference-sensitive well-being and inequality. It draws together complementary aspects of attempts to operationalise a more inclusive and multidimensional definition of well-being, through subjective well-being measurement, social welfare theory, and multidimensional indices of well-being and inequality. Theoretical proposals and empirical strategies are put forward, with illustrations using data from the British Household Panel Survey. Chapter 1 examines the underlying structure of subjective well-being, and the relationship between these subjective components of well-being and commonly targeted objective well-being indicators. A key finding is that subjective well-being follows a time-consistent dual structure of underlying ‘life satisfaction’ and ‘emotional well-being’ components. Additionally, the ‘life satisfaction’ component appears more strongly associated than the ‘emotional well-being’ component to changes in objective indicators of well-being. The ‘preference index approach’, the central proposal of the thesis, is introduced in Chapter 2. Preference comparisons are inspected at the individual and subgroup level, and a preference-sensitive index of multidimensional well-being is proposed. The chapter then uses the results of Chapter 1 to support the use of longitudinal life satisfaction regression to estimate the heterogeneous preferences between objective dimensions of life. Chapter 3 illustrates the properties of the preference index approach in terms of multidimensional inequality analysis. The main contribution is the incorporation of preference inequality as well as distributional inequality, and the ability to quantify their interdependent contributions to overall inequality in multidimensional well-being.

The ‘Great Recession’ has brought about a justified critique of the neoclassical economic model. It is within the context of this shock to the mainstream that the economic orthodoxy can be queried. The calls for a new economic paradigm request the mainstream’s acceptance of heterodox ideas creating a pluralist approach to economic theory, research and teaching. Following the shock of the financial crisis, UK government economic institutions indeed appear more pluralist than before the crisis. The Bank of England’s One Bank Research Agenda (2015) aims to remove its institutional ‘group think’ to incorporate different economic perspectives to better allow its efficient monitoring of the UK economy. Her Majesty’s Revenue and Customs have embraced pluralist economics, Senior Ministerial Advisors within HMRC learn Behavioural Economics, the work of Hyman Minsky, Jesus de Soto and Fredrich Hayek alongside neoclassical economics and fiscal sociology to gain a thorough understanding of economic phenomena. Andy Haldane, Director of Financial Stability at the Bank of England, has called for a pluralist economic methodology and in 2010, Conservative MPs proposed a Financial Services Bill based on the work of Hayek. Given this willingness for Policy at least to accept a pluralist economic approach, alternative economic theories must be evaluated to determine their relevance. Calls for a pluralist economic paradigm do not simply seek to replace one orthodoxy with another or indeed abandon entirely neoclassical economics. A pluralist economic paradigm is one where numerous explanations of economic phenomena are considered and policy is based on the most appropriate rather than the default. The thesis contributes to knowledge by providing an evaluation of Hayek’s theory of the trade cycle using a testable model and both reduced form and structural analysis, this is the first time this has been explicitly done addressing the shortfall in the literature identified in Kuehn (2013). Furthermore the thesis provides a consideration of the relevance of Hayek’s theory of the trade cycle for the UK addressing this gap in the Austrian Empirical Literature. The chosen analysis of a variety of models and tests also contributes to the Austrian methodological literature providing a comprehensive approach to the evaluation of Hayek’s theory. The UK data used for the empirical evaluation does not feature in any of the reviewed literature and thus its use represents a further contribution toward the UK gap in the Austrian Econometric Literature. An empirical evaluation of Hayek’s theory of the trade cycle using UK timeseries data contributes to the pluralist debate by determining the relevance of the theory for future policy consideration. A testable model of Hayek’s theory is developed and examined with various econometric tests to determine the support present in the data. Primarily Vector-Auto Regression, Vector Error Correction and Granger Causality Tests were used in the evaluation alongside Finite-Distributed Lag Models and an initial statistical evaluation of the theory and data. Within the calls for pluralism all empirical evaluation is conducted in a manner acceptable to the majority of Hayekian economists, yet utilising standard econometric tests to provide a persuasive and universally accessible evaluation of the theory. Whilst some evidence for Hayek’s theory of the trade cycle is found, the results show strong support for individual components of the theory, but limited support for the central tenet of the Theory, that of the unsustainable boom sowing the seeds of its own destruction. Yet, evidence is found for the predicted effects of the interest rate and of predicted endogenous turning points in the data, which are seen by several Austrian economists to be unique features of Hayek’s theory. A replication study of a key empirical study supporting Hayek’s theory with US timeseries data is also conducted with UK data, finding less support for the theory than its US counterpart. Given the calls for a pluralist economic paradigm, perhaps it is time to isolate the valid components of Hayek’s theory and incorporate them with other heterodox and orthodox theories. After all a true pluralist paradigm does not mean the primacy of a single approach.

Most of the literature which has considered the small sample bias of limited information estimators in simultaneous equation models has done so in the context of the static rather than the dynamic simultaneous equations model (DSEM). Therefore, an analysis of the performance of estimators in the general dynamic simultaneous equations case is timely and this is what is provided in this paper. By introducing an asymptotic expansion for the estimation errors of estimators, we are able to obtain bias approximations to order T−1. Following this we constructed bias corrected estimators by using the estimated bias approximation to reduce the bias. As an alternative, the use of the non-parametric bootstrap as a bias correction procedure was also examined. In Chapter 2, we analyse the Two Stage Least Squares ( 2SLS ) Estimator in the general DSEM. Based on the result in Chapter 2, Chapter 3 compared the Fuller modification of the limited information maximum likelihood estimator (FLIML) with the 2SLS estimator. The bias approximation and reduction in the pth-order dynamic reduced form are analysed in Chapter 4. The results indicate that FLIML gives much less biased estimates than the 2SLS estimation in the general DSEM. We have also observed that the bias correction method based on the estimated bias approximation to order T−1 provides almost unbiased estimates and it does not lead to an inflation of the mean squared errors compared with the associated uncorrected estimators. We suggest that the corrected estimators, based upon the O(T−1), should be used to reduce the bias of the original estimators in small samples. Alternatively, the numerical results show that the bootstrap method leads to an effective reduction of the bias and an inflation of MSE, however this reduction is not as effective as the first one.