Chapter 1: The monetary version of the sticky price intertemporal model of Obstfeld and Rogoff (1995, 1996), in which unexpected and expansive monetary shocks unambiguously generate a permanent nominal exchange rate depreciation and a temporary current account surplus, is outlined. After discussing some extensions of the basic model and verifying the lack of robustness of the main theoretical predictions to the introduction of alternative assumptions, the chapter provides an empirical investigation of the role of nominal disturbances for current account and real exchange rate fluctuations within a structural VAR approach for 15 OECD countries over the period 1979-1998, using the long-run restriction identification scheme suggested by Clarida and Gali (1994). The main empirical findings suggest that nominal shocks tend to have a significant role in generating temporary current account surpluses and that these effects are proportional to the degree of openness of the country. Chapter 2: Housing systems, as a major sector of industrialised economies, might have profound effects on the transmission mechanism of monetary shock. Despite a progressive convergence, however, EU countries still differ significantly in their housing and credit market institutions. This chapter provides a theoretical discussion of the ‘housing market’ channels of the monetary transmission mechanism (MTM) and offers some evidence on institutional differences across EU countries. Using recursive and semi-structural VARs, the role of house prices in the MTM is then assessed in eight European countries over the pre-EMU period. Results show a different degree of sensitivity of house prices, partly consistent with the institutional features of the European housing systems. The importance of these policy-induced changes in house prices to the transmission of monetary shocks to private consumption are then investigated. The chapter provides some support for the view that the house price channel may be an important source of MTM to consumption in those economies where housing and mortgage markets are relatively more developed and competitive. Chapter 3: This chapter extends the existing cross-country housing empirical literature focusing on the main fundamental factors affecting house price dynamics in a number of ways. First, through the implementation of seemingly unrelated regression (SUR) techniques and heterogeneous panel estimation methods, it is shown that European house prices are asymmetrically affected by real and financial variables. Subsequently, using a recent dataset, which collects quarterly information on housing and mortgage markets of EU countries, separate house price equations are estimated within an unrestricted error correction mechanism (ECM) approach for eleven European economies over the period 1980-2001. Results show that European house prices are driven by similar factors, but that their relative importance differs very significantly across countries. In particular, while real income is this single most important determinant of real house prices, financial effects play a relatively more important role in those countries that experienced a higher degree of financial liberalisation.

In this work we consider the explanations for the rejection of the Rational Expectations-Life Cycle permanent Income Hypothesis (RE-LCPI Hypothesis), based on the finding of the "excess sensitivity" of consumption to current income. The excess sensitivity finding is well established for both time series and cross sectional data, however, the reasons for excess sensitivity are less well established. A prominent explanation for the observed excess sensitivity of consumption to income, is that capital market imperfections will prevent the consumer from borrowing and hence prevent the consumer from realising her desired consumption expenditure path (liquidity constraints). Competing explanations of excess sensitivity include myopia and precautionary savings' motives. Although some studies have cited particular reasons for the rejection of the RE-LCPI hypothesis, few studies have attempted to discriminate between the alternative explanations. This dissertation proposes to identify and discriminate between these alternative explanations using the Nordic countries (Finland, Norway and Sweden). The thesis is structured into four key chapters. Chapter Two identifies if consumption for Finland, Norway, and Sweden is excessively sensitive to changes in income, that is, is excess sensitivity evident for these countries. From the evidence of excess sensitivity found in chapter two, Chapter Three attempts to discriminate between two alternative explanations for excess sensitivity - myopia and liquidity constraints. Chapter Four draws on material in chapter three, and extends it in a new direction. From evidence of asymmetries in Chapter Three, this chapter attempts to analyse the source of the asymmetry, in particular, it examines if the asymmetry can be accredited to liquidity constraints or not. While Chapters Three and Four attempt to discriminate between alternative potential explanations for the excess sensitivity of consumption to income changes, by seeking to identify asymmetric behaviour of a kind consistent with optimising behaviour in the presence of liquidity constraints or in the absence of asymmetry as would be consistent with myopia, Chapter Five examines an alternative explanation: the potential mis-specification arising from the assumption of certainty equivalent. Specifically the potential role of uncertainty about future income in generating precautionary savings is examined within a two group aggregate consumption function.

This thesis argues that Western theories of labour-management, which are predominantly neoclassical, do not capture the major economic forces operating at both firm and macro levels. Consequently the conclusions derived from the theory are often incorrect and also lead to erroneous policy prescriptions, both for the cooperative working within capitalism, and for the labour-managed economy. The thesis opens with a summary of neoclassical theories of the labour-managed firm, and theories of cooperative failure. The validity of these theories are tested using evidence drawn from the C.P.F. cooperatives and a sample of similar capitalist firms over the period 1950-79. The evidence lends very little support to the theories. The following chapters describe the actual experience of the cooperatives and capitalist firms over the thirty years, and concludes that the major differences between the C.P.F. cooperatives and capitalist firms are missing from neoclassical models. The final section of the thesis considers macro economic theories of the Labour=managed economy. It is argued that the failure of neoclassical analysists to present convincing macro economic theories of labour management is because of the rift between conventional micro and macro economics. The introduction of labour management is a change at the firm level, i.e. micro economic level which, using conventional economic theory, cannot be traced through to the macro economic level. As an alternative, Sraffa's analysis of a capitalist economy is adapted to labour management. This allows an analysis of how changes at the firm level effect macro economic conditions. The results derived from the application of a Neo-Ricardian model are found to be very different from those produced by neoclassical analysis. In the final chapter it is noted that existing empirical studies of Yugoslavia which claim to provide evidence of the behaviour predicted by neoclassical models do not provide conclusive evidence. The conclusion contrasts the policy prescriptions derived from neoclassical analysis of labour management, with recommendations derived from the alternative analysis presented in this thesis.

Chapter one presents a critical and detailed review of the stochastic frontier methodology from a macro-data perspective.  The advantages over the standard growth accounting approach are emphasised, and the main features of the translog production function, used throughout the thesis, are discussed. Chapter two uses the stochastic frontier approach to estimate different specifications of the production function, technological catch-up (efficiency improvements) and technological change (shifts in the production frontier) for 57 developing countries over the period 1960-1990.  It is well known that alternative specifications of the production function lead to ambiguous empirical evidence for competing theories of economic growth (Durlauf and Quah 1999).  Therefore, tests are performed to find the specification in line with the data under analysis.  Then the important issue of the role of human capital in the process of economic growth is also investigated, since it is not yet unambiguously determined (Islam 1995, p.1154).  Chapter three analyses the results based on Model 4* (Chapter 2) in more detail to provide a consistent decomposition of output growth.  The evolution of the entire distribution of the growth and productivity sources is analysed and a formal test for assessing the importance of growth factors is performed. With respect to regression analysis, this approach is likely to be more informative (Quah, 1996a,b, 1997).  The base of both the test and the visual analysis is the non-parametric kernel density estimator. The findings in the previous chapters motivate Chapter 4 of the thesis, which further explores the relative importance of FDI, imports of capital goods and human capital accumulation in the development process.

This work considers how it is that company structures, based on hierarchy, are able to persist over time. This question, though simple, is basic to industrial society, since although business organizations do in general operate with sufficient cohesion to produce their goods/services for sale, the traditional hierarchical structure has on occasions come under attack. Our aim will be to establish and understand the conditions under which hierarchy is able to persist - or conversely, under what conditions we might expect it to come apart. Our consideration does not however, preclude the possibility that the attack on hierarchy is more apparent than real - that any attack is at the level of limited ideology rather than social praxis. Hence it will be our position that we shall suspend belief in the persistence of the hierarchical structure and in this way be able to consider the conditions both for its persistence, and also for any challenge to be made to it. By pursuing the initial problem in this way we do not preclude the possibility of either 1) the permanence of hierarchy, or 2) the inevitability of its replacement with more/less democratic structures. Our aim is to understand the conditions for the persistence of hierarchical structures, and by implication the conditions under which they may be challenged by more democratic structures. There are two important features to our theoretical perspective: A) the process of knowledge selection to produce and structure expectations, B) a theory of power to structure the situation in which these expectations are made. In respect of the former we shall rely heavily on the work of Schutz, Habermas, and of Laing and Esterson, while for the latter we shall consider Lukes' three dimensional theory of power, developed from the perspective of Habermas, and in particular his Ideal Speech Thesis. This will result in a theory of the Lifeworld, which while substantially consistent with Schutz continues to establish in what respects the Lifeworld creates but conceals the possibility of the exercise of power. The importance of Schutz for us is that he provides a theoretical basis for knowledge creation for the individual social actor, and the structuring of knowledge into categories, which is consistent with our own view. We shall argue, however, that the view presented by Schutz does not take adequate account of the `restricting' or `limiting' aspects of the Lifeworld and the taken-for-grantedness (or uncritical attitude) which it sets up - that as Morgan's `Images' suggests the Lifeworld (as our `subjective stock of knowledge') can be a `Psychic Prison'. This argument in turn leads on to possible exercises of power of which the participants (ie power holder and subject) are not conscious. This will be developed by reference to Habermas's work. The importance of Lukes is his provision of an analytical framework for power, which recognises that power is a concept of greater variation than has been realised. Lukes, however, does not make sufficiently clear the meaning - particularly at the empirical level - of his third ('radical') dimension of power. For this reason we shall introduce the thesis of ideal speech, put forward by Habermas, to clarify and extend Lukes' work in a manner which is theoretically and empirically stronger, and methodologically more practical. We shall use a synthesis of Lukes and Habermas as a basis for our analysis of the social situation in which expectations are a) structured b) developed as a project in a social situation. By bringing together these two elements (ie the Habermasian adaption of Schutz and Lukes) we shall argue that individuals make expectations on their company which they develop from their Lifeworld and its subjective stock of knowledge. This process of knowledge selection and development of expectations, analytically sets a number of issues which shall be important to us in considering whether there is the social asymmetry we suggested exists as a support to existing organizational structures: 1) the knowledge selected may be so structured as to forestall the development of particular expectations, or so constrain behaviour that, in either situation, the structure of the organization goes unchallenged. 2) expectations can only be satisfied in competition with others - hence interaction with other employees will be important and particularly the Lifeworld definition of these employees (for instance competition between Management and Hourly paid may be influenced by the definition which the latter make of the former). 3) expectations shall be arbitrated upon by the company decision-making system (ie by the individual/group who have the authority to make the decision in question). At a relatively superficial level we must consider the values of this individual/group - but we have to go still deeper to understand the conditions under which this authority is regarded as legitimate or conversely regarded as illegitimate. These issues are closely connected since the legitimacy and illegitimacy or the decision-making system are largely determined - in our model - by the selection of knowledge, part of which is constituted by one's experience and/or interaction with other employees, as well as wider social knowledge which is employed by defining and interpreting the behaviour of others to develop expectations. Our perspective on this process is composed of two parts: 1) Employees make expectations of their company. 2) These expectations are generated in a process of experience and learning. We see no causal implications in this, but instead take the view that employees select from the knowledge available to them, in order to structure, guide and justify their behaviour. For instance this may be to A) justify the expectation of having more influence in their company's decision-making, and to indicate what would be appropriate behaviour to this end. Or alternatively B) indicate that this is not a reasonable expectation, and not a reasonable form of behaviour. Similarly the knowledge which is accessible can be employed to define and interpret the behaviour of relevant others in their own group and throughout the work situation -to account for, and explain what is happening, to foretell how to behave/not behave in the future. The process can, in other words, encourage or discourage the taking up of particular projects. Our particular interest is the dominance of hierarchy is maintained, restraining the development of more democratic organizational forms.

This thesis contains three essays on the macroeconomics of inequality. The first chapter analyses the effects of minimum wages on inequality. While there has been intense debate in the empirical literature about the effects of minimum wages on inequality in the US, its general equilibrium effects have been given little attention. In order to quantify the full effects of a decreasing minimum wage on inequality, I build a dynamic general equilibrium model, based on a two-sector growth model where the supply of high-skilled workers and the direction of technical change are endogenous. I find that a permanent reduction in the minimum wage leads to an expansion of low-skilled employment, which increases the incentives to acquire skills, thus changing the composition and size of high-skilled employment. These permanent changes in the supply of labour alter the investment ow into R&D, thereby decreasing the skill-bias of technology. The reduction in the minimum wage has spill-over effects on the entire distribution, affecting upper-tail inequality. Through a calibration exercise, I find that a 30 percent reduction in the real value of the minimum wage, as in the early 1980s, accounts for 15 percent of the subsequent rise in the skill premium, 18.5 percent of the increase in overall inequality, 45 percent of the increase in inequality in the bottom half, and 7 percent of the rise in inequality at the top half of the wage distribution. In the second chapter, I construct a model, where the supply of skills and the skill premium can increase jointly, as occurred in the US over the past few decades. I high- light the importance of the joint determination of the direction of technical change and skill formation. There is a positive feedback between these two variables. Technological progress is driven by profit oriented R&D firms, where profits are increasing in the amount of labour that is able to use these technologies. Therefore, when the supply of high-skilled 3labour increases, technology endogenously becomes more skill-biased. A more skill-biased technology leads to a higher skill premium, which increases the incentives to acquire educa- tion, and the supply of high-skilled labour rises. During the transition to the steady state, both quantities increase simultaneously. I map the dependence of the transition path of the economy on the initial skill supply and relative technology between the high- and the low-skilled sector. I find that, contrary to the previous literature, the skill premium and the skill supply can increase jointly even if the bias of technology is weak. In the third chapter, I relate the degree of progressivity of the income tax scheme to the prevailing income inequality in the society. I find that, consistent with the data, more unequal societies implement more progressive income tax systems. I build a model of political coalition formation, where different income groups have to agree on a tax scheme to finance the public good. I show that, the greater income inequality is, i.e. the further away the rich are from the rest of the population, the less able they are to credibly commit to participating in a coalition. Therefore, as income inequality rises, the rich are increasingly excluded from the design of the income tax scheme. Consequently, the rich bear a larger fraction of the public good, and the tax system becomes more progressive.

How do financial reforms affect the allocation of production within an economy and its long-run macroeconomic performance? How does the impact of financial reforms interact with the effects of other policy reforms or the influence of an economy’s structural characteristics? These are the central themes of this thesis. Chapter 2 examines how financial and trade reforms interact in determining the allocation of production within a general equilibrium heterogeneous firm trade model. While the two reforms have complementary effects on average productivity, the marginal benefits of trade liberalization for wages and household utility are reduced if much reallocative work has been done through a well-functioning financial sector. Financial reforms can spill over internationally via trade channels and greater usage of exports as collateral can enhance the benefits of trade reforms. Chapter 3 analyzes how domestic and international financial reforms shift production across firms and sectors. Using a modified macro credit multiplier model, changes in credit constraints prompt reallocations in production as firms respond to adjustments in sectoral relative prices and interest rates. Financial reforms generally lead to higher relative investment by more productive firms and to increased aggregate productivity. Intra-sectoral reallocations smooth out the steady state comparative static effects of financial reforms. Structural features of an economy condition the impact of financial reforms. Similarly, the impact of capital account liberalization depends upon the state of domestic financial reforms. Recent work has highlighted the potential for “threshold” levels of domestic 3institutional development above which the potential growth benefits of financial openness offset the associated risks. Chapter 4 provides a wide-ranging empirical analysis of potential threshold conditions using parametric and semi-parametric methods. It finds that there are clearly identifiable thresholds in variables such as financial depth and institutional quality and that the thresholds are lower for foreign direct investment and portfolio equity liabilities compared to those for debt liabilities.

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This thesis contributes to the theoretical literature that analyses the link between international asset trade and international risk sharing. Despite the massive increase in cross-border asset trade since the 1990's, consumption risk sharing across countries remains limited. In standard international business cycle models, efficient risk sharing requires that consumption should be higher in the country where it is cheaper to consume, implying a high positive correlation between relative consumption and real exchange rate, which is strongly rejected in the data. Recent contributions show that it is possible to account for this so-called 'consumption-real exchange rate anomaly' in models with goods and financial market frictions where international asset trade is restricted to a single non-contingent bond. Chapter 1 analyses whether this class of models can account for the anomaly under a richer asset market structure where agents can trade in domestic and foreign currency bonds. Even such a small departure from the single bond economy implies too much risk sharing compared to the data although the number of assets that can be traded is less than the number of shocks affecting each economy. Introducing demand shocks alongside sector-specific productivity shocks can improve the performance of the model only under specific parameter and monetary policy settings. Chapter 2 extends this analysis to study the implications of international trade in equities, portfolio transaction costs and recursive utility. Chapter 3 studies the interaction between monetary policy and foreign currency positions in more detail. Different monetary policy regimes can lead to different foreign currency positions by changing the cyclical properties of the nominal ex- change rate. These external positions, in turn, affect the cross-border transmission of monetary policy shocks via a valuation channel. The way export prices are set has important implications for optimal foreign currency positions and the valuation channel when prices are sticky and financial markets are incomplete. Chapter 4 compares the international transmission of uncertainty shocks under alternative asset markets with an emphasis on the behaviour of net foreign assets, exchange rate and currency risk premium and shows that a model with restricted asset trade performs better than a model with complete financial integration in matching certain aspects of the data regarding the dynamics of these variables in response to increased macroeconomic uncertainty.

This thesis consists of three essays, all of which use the tools of economic theory to analyze specific situations in which multiple strategic agents interact with each other. The first chapter studies the strategic transmission of information between an informed expert and a decision maker when the latter has access to imperfect private information relevant to the decision. The main insight of the paper is that the access to private information of the decision maker hampers the incentives of the expert to communicate. Surprisingly, in a wide range of environments, the decision maker's information cannot make up for the loss of communication and the welfare of both agents diminishes. The second chapter presents a model of electoral competition between an in- cumbent and a challenger in which the voters receive more information about the quality of the incumbent. If the incumbent can manipulate the information received by the voters through costly effort, the model predicts an incumbency advantage, even though the two candidates are drawn from identical symmetric distributions, and the voters have rational expectations. It is also shown that a supermajority re-election rule improves welfare, mainly through discouraging low-quality politicians from manipulating the information. Finally the third chapter uses a mechanism design approach to characterize the class of social choice functions which cannot be profitably manipulated, when the individuals have symmetric single-peaked preferences. Our result allows for the design of social choice functions to deal with feasibility constraints.