Recent research suggests that financial system development is important for economic development and for reducing financing constraints of firms (Levine, 2005). Consequently, researchers started investigating the factors that determine financial system development. A group of factors that have been identified are institutional factors. Many researchers have investigated the theoretical and empirical links among historical institutional factors, current institutional factors, and financial system development (Beck and Levine, 2005). There are, however, few studies that have investigated extensively the theoretical and empirical links among institutional factors and financial system development within the African context. Africa provides an interesting context to empirically validate and refine many of the theories that have been postulated to explain the relationships among historical and current institutional factors and financial system development. This is because Africa is in the process of developing its institutions and reforming existing ones and offers an opportunity to examine the impact of institutional factors on financial system development in nascent contexts. Therefore, this dissertation investigated the following research question: To what extent are institutional factors determinants of financial system development in Africa? To answer this research question, this study empirically evaluated the effects on financial system development of historical institutional factors that have been identified by four theories: legal origins theory, disease endowment theory, religion-based theory, and ethnic fractionalisation theory. Moreover, current institutional factors identified by the law and finance theory as possible determinants of financial system development were empirically examined. Furthermore, the links among historical and current institutional factors were empirically studied. The results show that the disease endowment variables are the only historical institutional factors that explain cross-country variation in financial system development in Africa. Additionally, this study finds that the institutional enforcement quality and efficiency of the judicial system are the only current institutional factors that explain cross-country variation in financial system development in Africa. Current institutional factors such as the efficiency of the legal property system and the quality of the credit information infrastructure do not appear to have effects on financial system development. Moreover, the institutional enforcement quality seems to be one of the possible channels through which disease endowment affects financial system development in Africa. This study also reveals that there are few statistically significant links among historical and current institutional factors within the African context. To my knowledge, this is the first study to show some of these empirical links among historical institutional factors, current institutional factors, and financial system development for the African context. The main conclusion of this dissertation is that institutional factors seem not to be determinants of financial system development in Africa to a large extent. In essence, institutional factors appear to matter for financial system development in Africa, but not as much as might have been expected judging from many calls for institutional reforms from the World Bank and others. The theoretical and policy implications of the findings of this dissertation are discussed, and future areas of research are also proposed.

The thesis consists of three papers, summarized as follows.        "The Determinants of Labour Market Institutions: A Panel Data Study"    This paper analyses the argument that labour market institutions can be thought of as devices for social insurance. It investigates the hypotheses that a country's exposure to external risk and ethnic fractionalisation are correlated with labor market institutions. Extreme bounds analysis with panel data of fourty years indicates that countries that are more open to international trade have stricter employment protection, strong unions, and a more coordinated wage bargaining process. Moreover, there is evidence that union density is negatively associated with the degree of ethnic fracationalisation.  "Why do Some Studies Show that Generous Unemployment Benefits Increase Unemployment Rates? A Meta-Analysis of Cross-Country Studies"    This paper investigates the hypothesis that generous unemployment benefits give rise to high levels of unemployment by systematically reviewing 34 cross-country studies. In contrast to conventional literature surveys, I perform a meta-analysis which applies regression techniques to a set of results taken from the existing literature. The main finding is that the choice of the primary data and estimation method matter for the final outcome. The control variables in the primary studies also affect the results. "The Effects of Trade on Unemployment: Evidence from 20 OECD countries"    This study empirically investigates if international trade has an impact on aggregate unemployment in the presence of labour market institutions. Using data for twenty OECD countries for the years 1961-2008, this study finds that an increase in trade leads to higher aggregate unemployment as it interacts with rigid labour market institutions, whereas it may reduce aggregate unemployment if the labour market is characterised by flexibility. In a country with the average degree of the labour market rigidities, an increase in trade has no significant effect on unemployment rates.