Incentives and financial institutions in the development process : Evidence from field experiments and panel data analysis

In this thesis, I investigate the role of incentives and financial institutions in the development process. Although these concepts are fundamental in economic literature as drivers of economic development, there is still a lot to be understood about the mechanisms through which these incentives and financial insitututions can influence the process. I present evidence from a combination of field-experimental research conducted in Uganda and from panel data analysis to demonstrate the influence of incentives and financial institutions to development. Precisely, I use field-experiments to assess the impact of monetary incentives to knowledge diffusion and workers’ effort and also use panel models to explore whether microfinance institutions are able to mitigate the adverse macroeconomic consequences of disasters on economic growth and whether the degree of central independence influences the economic performance in the period following a disaster. Studies in this thesis suggest four important findings. First, incentives do not only increase knowledge sharing between the initially trained subjects and their peers within self-selected groups but also increase the motivation of the initially trained subjects to master the training content. Second, if workers compare themselves and feel privileged, they can be motivated and decide to reciprocate especially when performing a voluntary work. Third, natural disasters adversely affect the performance of the agricultural sector — but if agriculturalists can access lending facilities from MFIs, such effects can be mitigated and forth, central banks that are less politically constrained put more weight on lowering the inflation pressure after a disaster than on stimulating short run output.