Economic structure and investment under uncertainty

This dissertation combines the structural approach of development economics with the more recent real option theory of investment under uncertainty. First, the main patterns of development are established. Based on data for 93 countries from 1970-94, it is shown that there exist robust relationships between development and 34 structural indicators. Second, using a similar cross-country analysis, it is shown that economic structures of less developed countries increase macroeconomic uncertainty. One whole chapter is used to define macroeconomic uncertainty and to illustrate the crucial difference between volatility and uncertainty. Third, using panel data, it is demonstrated that macroeconomic uncertainty has a significantly negative impact on gross domestic investment. Fourth, based on the recent empirical literature on the relationship between investment and development, it is concluded that investment usually increases development. Finally, the results of the four parts are connected with each other. Conclusions are drawn on implications for economic policy and future research.