| This thesis studies three important issues in development and macroeconomics. (1) Inequality and Economic Performance; (2) Entrepreneurship and Crime; (3) Factorial Distribution of Income and International Trade.; Chapter 2 proposes a new mechanism through which inequality may be harmful to economic performance: Illegitimate appropriation of private property. Increases in inequality increase the number of people in the society who feel they have less to lose and are therefore more willing to undertake the risky activity (crime). At the same time, it increases the expected payoff from victimizing someone since they are also more likely to be wealthier. Although such ideas are commonsensical, a formal analysis of there had not been attempted previously. The analysis shows that, contrary to the same conventional wisdom, redistribution of assets may in some circumstances be a poor policy choice.; Chapter 3 studies the effect of state-level crime rates on entrepreneurship incentives in Colombia and Venezuela. I find that the probability of starting a business is negatively affected by the extent of criminal activity in both countries and that the effect is economically important. All else equal, an individual is three times as likely to start a business in the lowest crime state in Colombia as compared to the highest crime state. In Venezuela the equivalent ratio is 2.; Chapter 4 shows that there exists a positive correlation between an economy's exposure to international trade and Capital's share in National Income. The correlation holds for most regions of the world, high- and low-income samples, and is robust to various controls for factor endowments. Furthermore, it is present within 28 industries, which suggests that it is not due to reallocation of factors towards more capital intensive sectors. One possible explanation for this finding is that openness hurts the bargaining power of labor relative to capital. We provide evidence in favor of this hypothesis using data on labor union strength. This is a result of joint research with Francisco Rodriguez. |
