Economic Policies, Volatility and Development

This dissertation offers an integrated collection of essays that seek to understand how economic policies and output volatility of countries depend on their level of development. Chapter 1 presents a general introduction, with the motivation and main results of the project. Chapter 2 introduces the main theoretical piece: a model that explains endogenous limited liability rules and market failures, using a dynamic environment with asymmetric information, with emphasis on wealth effects. Chapter 3 discusses why poor countries are more volatile than rich countries, from an empirical and theoretical perspective. Chapter 4 investigates how the structure of ownership (public, private, foreign) of strategic productive activities in the economy can change along the development path. Chapter5 develops the analytical and numerical foundations of the two-period model used in Chapters 1, 3 and 4, which corresponds to a reduced form of the model developed in Chapter 2.