I start the thesis with a focusing model in which increasing the range of values of an attribute makes the decision-maker place more weight on this attribute. This model explains the documented communality between risky choice and intertemporal choice, and provides a unique explanation to the common ratio, common delay, and magnitude effects. It also captures preference reversals between choice and valuation, and different forms of context dependence such as the asymmetric dominance effect. Since the model is not restricted to probabilities and temporal delays, I also apply it to allocations characterised by an amount of money and a social distance. It predicts ‘common social distance’ effects, magnitude effects in the social domain, and preference reversals between choice and valuation of allocations. I look for these social preference reversals in the second Chapter. I invite student subjects in the laboratory and isolate the effect of the social distance by comparing weak social distances, with allocations benefiting students in other Faculties, to strong social distances, where the allocations benefit widely different charities. Social distances are measured with tools developed in social psychology. I find preference reversals only with weak social distances, where subjects do not take into account social distances when they form a valuation. When social distances become stronger with the charities, subjects take social distances into account for both choice and valuation and preference reversals disappear. These results confirm that social preference reversals exist and that social distances are a relevant attribute. Finally, in the last Chapter, I test the main assumption of the model in the context of the asymmetric dominance effect. I replicate the effect but find it to be smaller than previously thought. Especially, it disappears when targeting risky low-probability, high-payoff gambles. There is also evidence of a range effect, which verifies the assumption of the model presented in the first Chapter.

Recent developments in behavioral and experimental economics have shown that many people display other-regarding motives, in addition to self-interest. These social preferences – which include inequality aversion, conditional cooperation, and motives for punishment – make sense of a number of phenomena left unexplained by standard economic theory. This thesis is a collection of studies examining social preferences using the tools of experimental economics. Chapter 1 introduces the thesis explaining our goals and methods, as well as previewing our substantive contributions. Chapter 2 reports an experiment designed both to replicate and extend previous studies. We elicit and compare stated and revealed inequality aversion at the individual- level for subjects drawn from three different subject pools. Chapter 3 investigates whether inequality aversion, as modelled by Fehr and Schmidt (1999), explains free riding and conditional cooperation in a public good game. Chapter 4 investigates whether observed variation in the directionality of punishment between two subject pools can be explained by the “Culture of Honor” hypothesis. Chapter 5 concludes.

This thesis is composed of three essays on the market perception to strategy change announcements. Specifically, it tries to investigate the market reaction around the strategy change announcement date and these event firms’ pre-announcement and long-term performance. It also focuses on the content analysis of FACTIVA news and analyst reports that are about the strategy changes. Chapter Two shows that in line with the need for new strategies, firms with strategy change announcements have higher debt, less cash, worse operating performance, lower market expectations while still exhibit higher growth prospects, make higher investment and have higher R&D relative to publicly listed matched firms. This chapter also finds that strategy change announcements are associated with positive short-term abnormal returns. This suggests that market perceives the announcement as good news for the firms’ long-term development. Further at one-year after the announcement date, event firms exhibit better operating performance, potential long-term growth prospects, improved liquidity and are less leveraged. In Chapter Three, my findings show that higher occurrence of positive (negative) words in FACTIVA news are associated with more positive (negative) short-term stock performance. Furthermore, the effects of negative tones are greater relative to positive tones, especially when strategy change announcements are less informative. Increasing weights in positive (negative) tones are associated with higher (lower) abnormal returns. When comparing FACTIVA news with the subsequent annual reports, positive tones exhibit similar market reaction while negative words in annual reports tend to have higher market impact. Chapter Four finds that higher occurrence of positive (negative) words in analyst reports exhibit more positive (negative) stock returns. In fact, the market responds more strongly to negative tones compared to positive tones in analyst reports. Increasing weights in negative words are associated with more negative stock performance. This suggests that analysts are particularly important in propagating the potential risks and challenges related to the strategy changes. Furthermore, this chapter shows that market participants pay more attention to positive tones in analyst reports when strategy change announcements are more informative or supplemented with more forward-looking statements. In contrast, market participants focus more on negative tones when firms do not disclose adequate useful information to the public. In addition, positive (negative) tones in analyst reports are associated with more positive (negative) market reaction relative to annual reports.

This thesis contains three empirical essays which aim to contribute to economic research in the field of microfinance. Specifically, the first of these essays, presented in Chapter 2, examines the effect of commercialisation on efficiency of microfinance institutions (MFIs) in Sub-Saharan Africa using Data Envelopment Analysis and truncated regression model. The analysis is performed on 273 MFIs in Sub-Saharan Africa for the period 2005 - 2011. It is shown that commercialisation has a positive effect on efficiency of MFIs. In the light of this finding, we uphold the view that commercialisation can bring some benefits to the microfinance industry. Chapter 3 reports the investigations of whether productivity growth in the microfinance industry are passed to microcredit clients in the form of lower interest rates, and whether the effect depends on the extent of competition in the industry, using a balanced panel data on 175 MFIs worldwide over the period 2005 - 2012. The study finds that the effect of productivity growth in reducing microcredit interest rates is greater for high levels of competition than for low levels of competition. Thus, the evidence suggests that microcredit clients can benefit from productivity growth in the form of lower interest rates as the microfinance industry increasingly becomes competitive. We therefore argue that productivity growth and competition should be encouraged in the microfinance industry. The third essay, presented in Chapter 4 considers the possibility of mission drift in microfinance; a situation whereby MFIs move away from targeting the poor towards better-off clients. Using two different measures of poverty, the chapter examines whether the location choices of MFIs in Uganda are consistent with the objective of extending financial services to the extreme poor; and whether the pattern observed varies across different types of MFIs. The analysis is conducted on 118 MFIs over the period 2009 - 2013, by adopting a static count data model and dynamic regression approach. The results point towards an interesting picture that is important to take into account in the debate on mission drift. We show that the location of branches of MFIs is initially correlated negatively with poverty, but this correlation disappears over time; suggesting that MFIs have a greater incentive to target richer districts during earlier years, but poorer districts tend to catch-up with time. Again, we show that Commercial Bank MFIs are more likely to increase their presence in poorer districts than do other types of MFIs. These results suggest that full-fledged commercially oriented MFIs can have a strong positive response to targeting poorer districts. The implication of these findings is that commercial microfinance could be pursued as a strategy to reach the unbanked segment of the world's poor population. Taken together the analysis presented in each of these three chapters appears to indicate that, contrary to the writing of some popular commentators, the cause of economic development may have little to fear and much to gain from the entrance of commercial MFIs. While this conclusion may surprise many development professional, it should not surprise the development economist that the very forces of competition appear to drive these findings. While it is quite possible that the MFI revolution could not have been set lose by the commercial sector, it certainly does appear that the market which they established is now a viable and flourishing area to do business. Just as importantly, fears that commercial lenders might not target the poorest, or could charge exploitative rates of interest, may have been overstated.

This thesis comprises three independent chapters, spanning the range of my interests. The first chapter provides estimates of the causal effects of social ties on aggregate, firm level and individual level economic outcomes. The second chapter is a first step at understanding the joint determination of language change and economic structural change which seems to have occurred over the past centuries and probably continues today. A joint theme in these papers is the attempt to contribute to our understanding of the extent to which cultural and social factors can impact market outcomes. The second paper is as well interested in a specific channel through which economic outcomes can feed back on a cultural aspect of societies. The third paper seeks to contribute to our understanding of a more traditional economic question, namely individual behaviour in strategic situations. In particular it uses a novel experimental design to investigate individual behaviour in unprecedented strategic situations and estimate the parameters of a structural non-equilibrium model of behaviour. I like to belief that the chapters of this thesis, especially the second and third chapter, tie up closely the theoretical and empirical work and make a humble contribution to our understanding of economic behaviour and market functioning.

Developing country entrepreneurs face family pressure to share income. This pressure, a kinship tax, can distort capital allocations. I combine evidence from a lab experiment—which allows me to estimate an individual-level sufficient statistic for the distortion—with data I collected on a sample of Kenyan entrepreneurs, to quantify the importance of the tax. My data reveal high kinship tax rates for a third of entrepreneurs in my sample. My quantitative analysis makes use of a simple structural model of input allocation fitted to my data, and implies that removing distortions from kinship taxation would increase total factor productivity, and increase the share of inputs used in the largest firms. These effects are substantially larger than those coming from credit market distortions, which I estimate using a cash transfer RCT. My analysis also implies strong complementarities between kinship taxation and credit constraints.

This thesis contains four chapters. The first chapter establishes a negative empirical correlation between the share of employees working under a temporary contract and the share of employees with high educational attainments employed in jobs for which they are overqualified. Subsequently, I show that a search and matching model with heterogeneous jobs and workers with directed search can explain this correlation. Temporary contracts induce entrepreneurs to post, in relative terms, more vacancies for jobs with low educational requirements thus reducing the time (cost) of finding one such job. As a result, some unemployed agents with high educational levels that were previously looking for a job that matched their level of formation may find it attractive to switch and start searching for one such easy to find job for which they are over-qualified. The second chapter compares the magnitude of fiscal multipliers at the zero lower bound in New Keynesian models with those that arise from a large-scale global semi-structural model (NiGEM). I find that, in NiGEM, once I impose the zero lower bound constraint, multipliers increase, as the literature predicts, but by a much smaller factor than in New Keynesian models. Whereas New Keynesian models predict multipliers well above one, or even larger than two, multipliers in NiGEM remain below one. All of the channels, highlighted by the literature, through which the zero lower bound operates to generate multipliers larger than one are operating in NiGEM but one. Contrary to the predictions of open economy New Keynesian models, a fiscal expansionary shock when the economy is stuck at the zero lower bound does not crowd in foreign demand for home goods in NiGEM. In addition, I also find that the results are sensitive to the degree of expectational myopia. Once I modify NiGEM to reduce the degree of expectational myopia and produce a foreign demand crowd in effect, I obtain that the predictions of the model become more in line with those of the New Keynesian literature. The third chapter describes the cyclical behavior of the relative price of investment using three different measures: instantaneous correlations on data detrended using the HodrickPrescott filter, correlations on VAR forecast errors and instantaneous correlations on frequencydomain filtered data. All three measures suggest that the relative price of equipment goods is countercyclical. Instead, the relative price of household and total private investment is countercyclical according to the correlations computed on VAR forecast errors and frequencydomain filtered data while correlations on data detrended using the Hodrick-Prescott filter suggest that the relative price of household and total private investment is procyclical. The fourth chapter reviews the theoretical and empirical literature on macroprudential policies and tools and tests empirically the effectiveness of several macroprudential policies and tools. We find evidence that macroprudential polices are effective at curbing house price and credit growth, albeit some tools are more effective than others. These include, in particular, taxes on financial institutions and strict loan-to-value and debt-to-income ratio limits.

This thesis contains three essays on development and organizations. Chapter 1 asks how much discretion should be given to politicians in the allocation of public positions. The discretionary allocation of positions by patronage remains widespread both in developing and developed countries; how patronage affects organizational performance, however, remains understudied. Using historical personnel and public finance data from the administration of the British Empire, I study how a civil service reform affected the allocation and performance of governors who are socially connected to their superior. Chapter 2 focuses on the role of career incentives in explaining performance differences among modern Indian bureaucrats. While rigid progression rules - such as seniority-based promotions and age-based retirement - prevent favoritism by shielding bureaucrats from political interference, these rigidities may also disincentivize: high performers cannot be fast-tracked, and low performers must be retained. We combine administrative data from the Indian Administrative Service (IAS) with survey data on the perceived effectiveness of civil servants to study how the combination of rigid entry, progression and retirement rules acts to disincentivize modern day civil servants. Chapter 3 moves beyond public organizations to study the role of collective reputation in a private organization. Using data from an online labour market where the country of residence is the salient group characteristic, I document a mechanism through which collective reputation perpetuates group inequality. Using an instrumental variables strategy, I identify reputational externalities between an employer’s first hire and the propensity to contract more workers from the same country. I provide empirical evidence that collective reputation serves as a coordination device, enabling workers to positively sort with employers.

This thesis consists of three papers that belong to the broad realm of Applied Economics. The first chapter studies the causal connection between trade and development, using one of the earliest massive trade expansions in prehistory: the first systematic crossing of open seas in the Mediterranean during the time of the Phoenicians. For each point on the coast, we construct the ease with which other points can be reached by crossing open water. We show that an association between better connected locations and archaeological sites emerges during the Iron Age when sailors routinely crossed open water. We corroborate these findings at the world scale. In the second chapter, we use oil discoveries in the US South between 1900 and 1940 to analyse whether male-biased demand shocks reduce women’s labour force participation. We find that oil wealth has a zero net effect on female labour force participation due to two opposing channels. Oil discoveries raise male wages, which leads to an increased marriage rate of young women and thus could have depressed female labour supply. But oil wealth also increases demand for women in services, which counterbalances the marriage effect. Our findings demonstrate that when the nontradable sector is open to women, male-biased demand shocks in the tradable sector need not reduce female labour force participation. The third chapter analyses whether the German National Socialists used economic policies to reward their voters after coming to power in 1933. Using newly-collected data on public employment from the German censuses in 1925, 1933, and 1939 and addressing the potential endogeneity of the NSDAP vote share in 1933 by way of an instrumental variables strategy based on a similar party in Imperial Germany, I find that cities with higher NSDAP vote shares experienced a relative increase in public employment: for every additional percentage point in the vote share, the number of public employment jobs increased by around 2.5%.

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