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The role of infrastructure in economic growth and development has been the subject of continued debate, yet no consensus has been achieved in the literature. This thesis examines the economic effect of infrastructure based on new evidence from China. We add to understanding of this complex phenomenon by focussing at micro levels, i.e., firm-level and household level with a focus on three critical infrastructure sectors: transport, renewable energy and information communication technologies. We employ a series of datasets on infrastructure, firm performance, and household economy from China in our examinations. Our first empirical study focuses on the economic effects of city’s ICT infrastructure on firm performance. We have found that the improvement of city’s ICT infrastructure positively improved firm’s profitability, marketing, and innovation. By taking advantage of an exogenous variation of city’s ICT using the telecommunication upgrade as a natural experiment, we establish the causal impact of city’s ICT infrastructure on firm profitability. We also identify the mechanisms in which ICTs impact firm performance, including the firm’s efficiency, firm’s labour, and firm cost. Our second empirical study focuses on the renewable energy sector and its influence on China’s rural household economy over the past two decades. We provide empirical evidence in this under-investigated area of research, and have found that renewable energy, including bioenergy, solar energy, and hydropower energy, indeed improved the rural household economy in China. In the third empirical study, we then focus on the impact of improved transport infrastructure connectivity on the litigation risks of listed firms in China. Based on a natural experiment on China’s highspeed rail system construction, we have found that the improvement of transport infrastructure connectivity reduced firm’s litigation risks. This study shows that the impact of improved transport connectivity on listed firms’ litigation risk stem from the reduction of information asymmetry, and also the increase of external regulations and monitoring. Overall, we have found evidence that transport infrastructure, renewable energy infrastructure and ICT infrastructure played a positive and critical role in the economic development from the perspectives of firm performance and household economy, and also provide in-depth analysis of the underlying mechanisms. The findings in this thesis offer evidence for policymakers that improvement of infrastructure contributes to the productivity, economic growth and social development, and reasonable deployment of infrastructure could pay off.

This thesis studies a theory for the amplification of technological improvement by the production network structure of the economy. The theory is motivated by the idea that, to the extent that inputs and outputs of industries form a chain, improvements are passed down the chain and accumulate multiplicatively. Under a simple model for technological improvement it is possible to compute the overall improvement factor for the general case where the production network has a complicated structure containing cycles. We call this the trophic depth by analogy with ecology. This leads to testable predictions about GDP growth and its variance. We analyse data for 40 countries and 35 industries from 1995 to 2009 and demonstrate that trophic depths are strongly correlated with economic growth. A regression of GDP growth of countries against their trophic depths has a highly statistically significant R-squared equal to 0.38, and when other standard explanatory variables are added to the regression, the trophic depth remains a robust and statistically significant contributor. We perform some statistical analysis to understand the evolution of trophic depths at different stage of the economic development. We identify two growth paths. Along the first growth path, countries are catching up frontier economies while along the second growth path countries are falling behind. This approach allows us to make some forecasts about the evolution of trophic depths and of the wealth of countries. This provides a comprehensive framework to understand the acceleration and deceleration of economic growth. Then, we study another type of technological progress that corresponds to the adoption of new goods in the production chain. This mechanism is related to the dynamic of the production network and for this purpose we perform a link prediction analysis to determine some key factors for new adoptions. Finally, we analyse the relation between stock return comovement and institutional preferences across stocks of various size. A growing literature highlights the role of investors' common asset holdings on market dynamics. While previous studies focused on large stocks we also include small stocks in the sample in order to acknowledge the shift in institutional preferences towards small stocks over the last decades. Moreover, we add the input-output linkages between firms from different industries to our set of explanatory variables.