Essays on Institutions and Development

This thesis studies three different aspects of the development of societies. The first chapter studies the effect of monopolistic competition in the presence of moral hazard on consumer welfare and the efficiency of resource allocation based on market institutions. The second chapter analyses the effect of capital market imperfections on the evolution of inequality and conflict between different socio-economic classes. The goal of this chapter is to provide a framework of the study of the effect of economic development on the dynamics of state repression. The third chapter looks at the process of development from a historical perspective and studies the effect of European colonization on contemporary economic development of former colonies. To this end, I examine the effect of colonization on genetic and non-genetic (e.g. institutional) aspects of former colonies. The broad message of this thesis is that non-market factors - historical and contemporary factors relating to social norms, beliefs, and institutions - play a crucial role in determining societies' potential for development and their prosperity.