The nexus between the environment and development is often analysed through the sustainable livelihoods framework and within this framework, livelihood diversification has dominated much of the literature on sustainable livelihoods in the late 1990s and early 2000s (see Tacoli, 1998; De Haan, 1999; Ellis, 2005). This literature shows that agriculture is not the only source of livelihood for rural people in developing countries and diversifying into non-farm activities is increasingly adopted as a viable livelihood strategy and growing in its importance. Since then however, diversification seems to have lost favour in both the academic and policy discussions. Recently, with climate change and the recognition of its adverse impacts on livelihoods at the forefront in the developing world, there is a revival of interest and discussion on diversification as one of the main strategies by which rural people can respond to the challenges of climate change. This thesis is an effort to document local ways of responding to the impacts of climate change and how existing policy instruments at macro and meso level mainly social protection schemes contribute to the efforts already undertaken by individual households at micro level. In view of this, the thesis contains four studies which provide theoretical and empirical analysis on non-farm diversification and the role of the Productive Safety Net Programme (PSNP) in climate change adaptation in rural Ethiopia. The first study discusses the perceptions of smallholders’ towards climate variability and change as well as local adaptation strategies based on a case study of two districts in Northern Ethiopia. The study makes use of primary data gathered from focus group discussions and in-depth interviews with farmers and secondary data on key climate variables–rainfall and temperature and compares farmers’ perceptions with climate records. The results show that farmers perceive changes in their local climate and their overall perception matches with the results from rainfall and temperature trend analysis. The study also reveals that the greatest impact of these changes in rainfall and temperature are felt on the subsistence farming, which is already hard-pressed to meet the ever-inextricable challenge of food insecurity. Smallholders are also found to employ farm-level adaptation strategies combined with diversification. However, the current level of diversification appears to be dominated by natural resource-based strategies that may not be sufficient to deal with the impacts of current climate variability and expected changes. The second study uses the Ethiopian Rural Household Survey (ERHS) over the period 1994–2009 to analyse the factors that determine participation and returns from non-farm activities in rural Ethiopia. This study uses both the number of activities and income to measure non-farm diversification and estimates a range of micro econometric models. The results suggest that many of the variables that determine non-farm diversification belong to pull factors and are therefore a reflection of accumulation strategies. Despite this dominant pattern, however, it is likely that the poor are also diversifying into non-farm activities to earn income during agricultural off-seasons to smooth consumption. The third study examines the impact of non-farm income diversification on income distribution and poverty using Gini–coefficient decomposition, fixed effects and probit models. These analyses reveal that non-farm income diversification has a positive impact on rural households’ welfare and income distribution. This result strengthens the argument that non-farm income diversification can be a good strategy to lessen agricultural risks. The fourth study uses a sub-sample of the ERHS for the period 2004 and 2009 to examine the impact of the Productive Safety Net Programme (PSNP) as the main social protection scheme on household non-farm income diversification as an adaptation strategy to climate change. This is an impact evaluation study that employs the Difference-in-Differences approach combined with Propensity Score Matching for a panel of 1306 rural households. The results indicate that receiving transfers from the PSNP, on average increases income from non-farm activities and confirms the hypothesis that social protection can promote positive adaptation strategies and serve as effective means of reducing the vulnerability of smallholders to climate change induced shocks.

People’s capability to flourish as human beings critically hinges on their health status. For this reason, some of the most influential scholars of our time consider health inequalities as one of the most worrying types of inequalities in our society. Although health inequalities have been a priority of many governmental and international bodies’ agendas since the 1990s, they persist and the urgency of their reduction is now reiterated by the Sustainable Development Goals agenda. To reduce health inequalities, it is essential to gain a better knowledge about them, including their identification as well as their determinants and evolution. From a policy perspective, it is also fundamental to understand their aftermaths. This doctoral thesis is a collection of three empirical essays that contribute to the understanding of drivers and consequences of health inequalities. The first essay analyses factors that contribute to differences in physical and mental health between Italian natives and immigrants and among immigrants themselves by focusing on the entire distribution of health. The second essay presents a gender analysis of the influence of the Great Recession on the distribution of mental health in Italy. The third essay estimates the lasting effect of poor early childhood health on later educational achievements in Indonesia, shedding light on the period that matters most for child development.

For a long time economic theory argued that the level of economic development depends on the allocation of production factors both between and within economies. However, it is rarely underlined that allocation depends on organizational decisions and management, especially on organizational decisions within and across firms. Understanding such decisions through both empirical studies and theory is highly important. It may enable us to understand the microeconomic roots of macroeconomic patterns. This thesis conducts at the empirical analysis of organizational decisions that may potentially influence aggregate performance. It shows connection of the organizational decisions with both the economic environment and firm characteristics. The focus is on transition countries, after the massive privatization period. The reasons are threefold: i) essential differences that emerged in performances of countries with similar heritages and starting points ii) the need to quantify the impact of “complementary” reforms after privatization iii) the mis-match between the expectations and the results of building a market-oriented environment. Following a first chapter overviewing the economic context, theoretical positioning and empirical framework, the thesis contains four studies. The first two studies (Chapter 2 and Chapter 3) are devoted to firm boundaries decisions as one of the key organizational decisions. By using the cross-section data of the EBRD-World Bank Business Environment Enterprise Survey (BEEPS III) and utilizing the predictions of Antràs and Helpman's global sourcing modelling, I study the industry-level incidence of integration and firm-level decisions to redefine firm boundaries. Both studies highlight the importance of both technological and institutional factors. Moreover, the second study presents the firm-level perspective and highlights the importance of firm propensity to change. The third study (Chapter 4) is focused on changes of internal firm organization and their connection with international trade liberalization. It provides preliminary answers to the following questions: (i) what drives flattening decisions, and (ii) whether flatter structures may be associated with a higher degree of control. By using the Management, Organization and Innovation (MOI) Survey, this study provides new evidence on the positive connection between increased competition from imports and firm flattening in transition countries. It also suggests that flattening may have more centralization features than is usually assumed. The fourth study (Chapter 5) explores the connection between management quality and corruption. By using the BEEPS V cross-section data, I underline the general negative connection between the management quality and different kinds of corruption over the period 2011-2014. However, the results also indicate the existence of idiosyncratic links between corruption and quality of management in some transition countries. As a result, the thesis contributes to the literature by advancing the state-of-the-art knowledge on firm organization in transition countries over the period 2005-2014. First, it identifies significant differences between country groups, namely EU and non-EU transition countries. The differences are persistent and characteristic for all the types of organizational change considered in the thesis, as well as the link between management and corruption. In particular, in non EU-transition countries, these differences are due to country-level and firm-level idiosyncrasy. Second, the thesis evidences that, regardless of numerous reforms of the business environment, firms in transition countries are rarely subject to organizational changes. However, a small number of firms subject to organizational changes significantly out-perform their counterparts. Consequently, it is important to understand what features of the economic environment or characteristics of firms prevent such efficiency-enhancing changes. Third, the thesis shows that firms in transition countries differ in their internal organizational structures, which they adjust to changes in product market competition. However, the intensity of these adjustments is heterogeneous across countries and industries. Fourth, a negative connection between management quality and corruption indicates that further simplification of business regulations and anti-corruption measures would unquestionably enhance the quality of management in EU transition countries both at the firm and at the country level. However, similar measures are not equally efficient for non-EU transition countries, because the link is idiosyncratic in these countries at the firm level. This thesis provides new evidence on the significant role of contractual links, technology complexity, product market competition and corruption in explaining the gap between micro-behavior and macro-objectives. However, the results put forward the need for i) a bottom-up approach, with firm behavior being analyzed and considered as an underlying force of aggregate and international performance, and ii) theories that account for firm organizational adjustments, because such adjustments may significantly alter our understanding of international trade gains and the channels through which efficiency enhancing reforms act and affect industrial reorganization.

This thesis contains three studies which provide theoretical analysis and empirical evidence on the decision-making of farm households under shocks and imperfect markets in Vietnam. The first study attempts to investigate the effects of the 2007-08 global food crisis on the investment, saving and consumption decisions of household producers by using the panel data of the Vietnam Household Living Standard Survey (VHLSS), covering 2006 and 2008. The results show that the high food prices had a positive effect on only fixed asset investments in the period of the crisis. When the price shocks are incorporated in the financial conditions, the findings reveal that the effects of household incomes, loans obtained and land sizes matter. The second study uses the Vietnam Access to Resources Household Survey (VARHS) of 2010 to assess the determinants of chemical fertiliser adoption for rice cultivation, and effects on productivity and household welfare. The analysis implements both nonparametric (propensity score matching) and parametric (instrumental variables) approaches. The findings show determinants affecting decision of adoption differ from those affecting decision of adoption intensity. The results show unsurprisingly positive impact on outcomes, but focus on advantage of using parametric approach to estimate these impacts. The third study employs a sub-sample from the 2008 VHLSS that is restricted to rural areas and to children from 10 to 14 years old to explore the relationship between farmland and the employment of children on their family’s farm. The hypothesis is tested in three models (the Tobit, Heckit and double-hurdle models), in which the dependent variables are examined for two stages of decision-making, including the probability of participation and the extent of participation. Empirical evidence supports the hypothesis that child labour increases in land-rich households and decreases in land-poor households.

In the last decade several surveys have suggested that monetary motivation is just one face of the diverse set of motivational drivers of employees' behavior, and sometimes it is not even the most powerful: indeed, they seem to be moved by different psychological motivations, such as peer motivation, the intrinsic desire to do a good job, recognition, and so on. Behavioral and experimental economics incorporate these psychological elements into the standard agency theory, and provide experimental evidence to support their relevance. The aim of this dissertation is to explore the effects on employees' behavior of two of these psychological forces: intrinsic motivation and solidarity towards peers. Chapter 1 is a review of the effects of the interaction between intrinsic motivation and other motivational forces, both external (such as external interventions, social context, and externally set goals) and internal (such as subject's identity and achievement motives). The laboratory experiment presented in Chapter 2 investigates the relation between intrinsic motivation, wage delegation, and performance, with a twofold aim: 1) testing whether subjects who are delegated their wage choice become more intrinsically motivated 2) exploring the different reactions to wage delegation of differently motivated workers. Chapter 3 reproduces the cash posters framework à la Homans (1953, 1954) in the laboratory, and it examines whether employees are moved also by solidarity concerns towards their coworkers.

The thesis investigates the relationship between firm heterogeneity and international trade from the perspective of a developing country. The standard heterogeneous firm trade models (Melitz, 2003; Bernard et. al, 2003) have largely focused on differences among firms in terms of an exogenously given productivity which would explain why only some firms self-select into international markets while the others serve the domestic market. Empirical evidences, especially from developing countries, note that firms’ selection into export is also the result of conscious investment decisions by firms that aim to improve their productivity and product attributes with explicit purpose of becoming exporters (Lòpez, 2004). In order to further understand the selection mechanism of developing countries’ firms into international markets, this thesis explores the roles of prices, quality and access to finance differences across firms as additional sources of heterogeneity, as well as their interaction. The thesis is composed of three self-standing but related empirical papers that exploit a unique panel data set that come from the annual Ethiopian Large and Medium Scale Manufacturing Enterprise census, and one concluding chapter with policy implications. The census is run by the Central Statistical Agency of Ethiopia (CSA). Unusual in many firm-level surveys, this data set provides plant-product level information on quantity and value of production and sales in both the domestic and foreign markets. Among other information, the census also collects data on the obstacles that firms face in their activities including financial resources. The richness of the data set allows constructing plant-product-level price and quality index, and firm-level access to finance indicators. The first chapter investigates the role of price heterogeneity and demand factors in examining the link between export and productivity. One of the well-known empirical regularities in the literature is that, on average, exporters are more “productive” than non-exporters (ISGEP, 2008; Wagner, 2012). Despite this consensus, what the referred productivity really captures remains blurred: since quantity information is rarely available in most data sets, the standard approach is to proxy quantity by firm-level revenues deflated by industry-level price indices. However, this approach ignores within-sector price heterogeneity and, as a result, it confounds physical efficiency (output per unit input) and demand components into the revenue-based productivity estimates (De Loecker, 2011). This bias would be further exacerbated when firms operate in different markets, and thus have different pricing strategies. To the extent that the demand structure is different in domestic and foreign markets, it is reasonable to expect price differences between exporters and non-exporters, not to mention within-sector variations. Using a rich panel data from Ethiopian manufacturing firms, the first chapter characterizes firms by three distinctive margins that are confounded in revenue productivity: physical productivity, output prices and demand shocks, and examines the relationship between these different sources of competencies of firms, and their separate role in shaping export participation. The main results show that exporters are more productive than non-exporters in both revenue and quantity based productivity measures. However, the productivity gap is larger in revenue productivity. Regarding the decision to export, revenue productivity and price significantly explain probability to export, but physical productivity hardly plays a role. Further evidence shows that price is increasing in revenue productivity and decreasing in physical productivity. On average, exporters charge higher prices than non-exporters. The overall results suggest that revenue productivity overstate the relationship between export and productivity because exporters have favourable demand condition that allows them to charge higher prices than non-exporters. This finding provides a new insight in understanding how export contributes to aggregate productivity growth. To the extent that exporters are more productive than non-exporters, the findings about prices are at odds with the standard firm heterogeneity model of Melitz (2003), where more productive firms have lower marginal costs and thus charge lower prices. The second chapter addresses this puzzle, further investigating the determinants of firms’ decision to export. To this end, I refer to the analytical framework that extends the standard firm heterogeneity model by introducing quality (e.g., Hallak and Sivadsan, 2013). Recent empirical findings also confirm that exported products feature higher prices than domestic products, and this price difference is ascribed to quality differences (for example see, Iacovone and Javorcik, 2012). Nevertheless, even if prices do correlate with quality, a major limitation of using prices as a proxy for quality lies in the inability to distinguish between quality and cost factors. To address this issue, I follow the recent empirical strategy proposed by Khandelwal (2010) to estimate quality, thus relaxing the assumption product quality is fully captured by its price. The results show that high-price products are more likely to be exported. However, once price is adjusted for quality difference, products with higher quality-adjusted price are less likely to enter into foreign markets. Jointly these results suggest that the observed price-export relationship reflects quality differences. Furthermore, I find that quality is the most important factor in determining firm export decision; and the effect of firm efficiency on export mainly operates through the quality channel. Based on an analysis of the dynamics of quality and product entry, I find that high-quality products self-select into export. Specifically, the trajectories of exported products show that quality upgrading took place three years prior to export entry. In the run-up phases of export entry, firms also change the composition of their production in favor of future exported varieties. The third chapter, is the result of a joint work with my supervisor Stefano Schiavo, and investigates the mechanisms through which access to bank credit affects firms export. In particular it examines the interplay between financial constraints and product quality in explaining firms’ export behavior using information on a panel of Ethiopian manufacturing firms. Similar to many recent studies, the previous chapter suggests that quality matters a lot for export and, moreover, that firms need to make conscious investment decisions aimed at upgrading their product quality before entering foreign markets. The implication is that, in addition to its direct effect on firms’ ability to pay upfront entry costs, access to finance may affect export decisions through its effect on investment. Since firms in developing countries have typically limited internal revenue and operate in underdeveloped financial markets, financial resources are especially important in shaping the decision to export. The main results confirm the presence of substantial sunk costs associated with exporting. Despite this, bank finance does not appear to have a strong direct effect on export participation. On the other hand, both present and past product quality is robustly associated with export status, and quality upgrading requires substantial investment. Therefore, bank credit is relevant for export only insofar as it is channeled to the fixed investments required to enhance quality. An important implication of this chapter is that improving financial conditions and access to bank credit can help firms to move from low- to high-quality products, enhance their ability to access foreign markets and therefore improve the overall export performance of the economy. The common message of all the three chapters is that the success of Ethiopian firms in international market is mainly driven by demand factors in which only firms that able to attract demand for their products succeed in foreign markets. However, despite the presumed relevance of firm productivity efficiency to drive export, there is no strong evidence that this apply for Ethiopian firms. Further analyses of the demand factors unveil the crucial role of product quality upgrading in determining firms’ entry into export markets. These findings sheds some light on the sources of the productivity difference between exporters and non-exporters that have been found in the literature, including studies focusing on African firms (for example, Van Biesebroeck 2005, and Bigsten and Gebreeyesus 2009). Furthermore, it confirms the general importance of satisfying foreign market quality standards for firms in developing countries to succeed in international markets (Chen et.al., 2008). The evidence suggests that export promoting policies that exclusively focus on achieving quantitative targets, such as productivity, as a means to increase competitiveness in international markets should be revisited: especially for developing countries, a policy shift from quality to quantity is a right direction to go forward.

This dissertation investigates small remote island economies (SRIEs)—a unique grouping of countries that has not been addressed systematically in the economics literature. The rationale behind this categorisation lies in the interactions of smallness, islandness and remoteness. These interactions might exacerbate the problems face by these economies, and possibly create new opportunities for them. This study consists of four essays which address their most important economic issues. The first essay brings SRIEs into context by drawing from the existing literature. Economists and other social scientists acknowledge the economic challenges of smallness: limited scale economies, limited resource endowments, economic concentration, high economic openness and consequent vulnerability to external shocks. Many small countries are also islands: islandness contributes to economic volatility because it increases the risks associated with environmental hazards, climate change, and man-made and natural disasters. The new category SRIEs highlights a well-documented economic problem—remoteness. However, there is little research on the implications of remoteness for small island economies. This thesis addresses this gap in the literature and seeks to better inform policy. Many SRIEs were affected by the dismantling of the Multifibre Agreement (MFA). MFA quotas guaranteed that the textiles and clothing (T&C) products of SRIEs had accessed to developed markets and protected these small economies from competitive larger developing countries. The second essay adopts a novel methodology—network analysis—to investigate the impacts of the ensuing trade liberalisation in T&C on SRIEs. The MFA altered T&C trade patterns: in the post-quota period, SRIEs preferred to trade with closer partners, thus, supporting the hypothesis that remoteness matters. Network statistics demonstrate that liberalisation led to convergence. SRIEs had a relative comparative advantage in final rather than intermediate products. An analysis of trade specialisation patterns confirms that MFA quotas created artificial comparative advantages. The third essay analyses individual cases of SRIEs through a global value-chain framework. T&C global fragmentation of production was shaped by quotas. A distance effect on trade is revealed as trade with relatively remote partners declined post-MFA. The results of a unit-value analysis support the thesis that those SRIEs that survived moved up the value-chain or upgraded to maintain competitiveness. Upgrading involved shifting to higher-valued products and niche markets but also integrating regionally. The last essay provides an alternative explanation for the notion of remoteness, particularly when viewed from a tourism perspective. Scholars agree that nature attracts tourists. An exploratory analysis shows that SRIEs are well-endowed in nature. Indeed, the econometric results show that remoteness is positively associated with tourism performance. Price acts as a sorting factor signalling the high-value tourist to choose less competitive but remote destinations; destination choices, hence arrivals, are price-dependent. However, price is irrelevant for expenditure per tourist. In sum, the cost of remoteness can be offset by its value. Remote island tourism is proposed as a positional good. Keywords: small islands, remoteness, network analysis, value-chain analysis, tourism JEL classification: F13; L67; L83; O50 ; R12

The increasing internationalization of Industrial Districts (IDs) is affecting the system’s production organization and the institutional context surrounding it, raising concerns about the role of localized industries for the development of local societies. To explore the impact of international openness on IDs, we focus on the endogenous cognitive processes occurring within the local system and resulting from the absorption and transformation of internal and external knowledge inputs. Using a conceptual and empirical approach, we contribute to enhance the current understanding of the issue by analyzing the transformations of IDs in terms of the variations on the stock of knowledge embedded into the system, namely the stock of systemic knowledge. In the First Chapter, we develop a conceptual frame to describe the endogenous cognitive processes determined by internationalization. We define three types of processes affecting systemic knowledge: “learning”, contributing to the increase of systemic knowledge; “forgetting”, determining the decrease of systemic knowledge; and “unlearning”, corresponding to the case in which the changes of the ID knowledge endowment lead to both learning and forgetting processes. In the Second Chapter, we apply the conceptual frame to a quantitative analysis referred to a dataset of Italian industrial firms between 2008 and 2015. The aim of the analysis is to measure how the type of internationalization undertaken by the mass of firms in the region, affects the innovation strategies of the ID firms located in the same territory. Based on the distinction between knowledge-seeking and knowledge-exploiting internationalization strategies, the analysis confirms that internationalization affects the innovation strategies of ID firms in different ways. We expect this is because, by modifying the system’s endowment of knowledge, internationalization can either support or constrain the emergence of external economies of learning, affecting local innovation. Chapter Three presents another application of the conceptual frame based on the case study of the Macerata-Fermo footwear IDs. The analysis has the purpose to explore the endogenous cognitive processes triggered by international openness, and to disentangle the potential development paths that the systems are undertaking. In so doing, we also consider the contextual factors affecting the system’s development path, such as the institutional background. In addition to informing us about the learning, forgetting and unlearning effects in the Macerata-Fermo IDs, the findings highlight that the degree of industrial diversification within the system is key to define its development path, favoring unlearning processes towards other industries in response to structural shocks.

A boost in the scale and complexity of international migration flows have occurred in the last decades. Movements of large numbers of people may produce welfare gains to families and communities left behind. This thesis analyses the implications of migration on well-being of sending societies, adopting a household-level perspective and addressing two specific issues: the impact of remittances on health consumption decisions of relatives left behind, and the role of migration as risk management strategy in response to natural shock exposure. The effect of international remittances on household healthcare consumption is tested using data from the “Peruvian National Survey of Households”. Remittances positively impact on healthcare consumption shares and this propensity is independent of the occurrence of a health shock, confirming the importance of migrant transfers for human capital accumulation. In the second part, I identify whether and under which circumstances migration represents a coping strategy to deal with sudden onset climatic shocks, examining the case of Hurricane Mitch in Nicaragua. The findings obtained show that shock severity does not act as push factor for international migration as a whole. Only individuals belonging to agricultural households experiencing high exposure to the natural disaster increase their later likelihood to move abroad. Remittances turn out to be an efficient insurance tool to recover after natural shocks. Income flows from international migrants support household welfare preservation over the two years following the disaster, reducing the risk of being trapped into poverty.

The Doctoral dissertation centers on social preferences. Three experimental studies address the identification methods and the implications of distributional preference types and pro-sociality on economic decision-making. In Chapter 1, the identification of social preference types using distributive choices is discussed. A thorough review shows that the two main approaches - parametric and non-parametric- have been productively used but produced inconsistent results in previous studies. The experiment in this Chapter is designed to examine the categorical agreement between the two methods: whether they classify the same subject into the same type. Chapter 2 presents a laboratory experiment investigating whether people strategically signal a certain type of social preferences. I consider four different distributional types and compare the distribution of these types under two settings: with and without strategic reasoning. In Chapter 3, I report an experimental study on the strategic exploitation of others' pro-sociality for own's benefit. This study is conducted within the principal-agent framework and aims to test whether employers make use of workers' pro-social motivation, offering a compensation scheme which is tailored to workers' pro-sociality.