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This dissertation presents three chapters on the role of political institutions in the allocation of assets and on the dynamics in the corporate taxation policies of multinational firms from a political economy perspective. Chapter 2 revisits the role of the political regime on asset returns in an International Capital Asset Pricing Model (CAPM) framework. Chapter 3 explores the linkages between foreign aid and the quality of political institutions of a nation. Chapter 4 adopts a political economy framework and tries to investigate the impacts of taxation policies adopted by the multinationals on domestic welfare of nations.;Chapter 2 titled, Effect of the Political Regime on Asset Returns in Emerging Markets: An Empirical Investigation explores the linkages of political institutions and stock market development of emerging economies. Using a Capital Asset Pricing Model (CAPM) framework and a sample of 17 Emerging countries, the results show that political regimes play a significant role in the average stock return of assets. Democratic institutions provide an environment with secured property rights, lower risks of expropriation by the government, well developed capital markets and favorable investment conditions. The results suggest that better political institutions have a negative relationship with asset return conditional on the fact that the nationalization of assets has not occurred. Firms in autocratic regimes have higher average returns that exceed the required returns which is consistent with the fact that autocratic institutions are more prone to political and financial risks. In CAPM framework average returns equal required returns over a long enough period of time. The fact that the average returns are higher than the required returns in autocratic countries can partly be explained by the fact that the nationalization of the assets, for which investors require insurance premium, had not yet occurred in my sample. An alternative model to the standard CAPM risk model is considered to establish robustness of the results. Additionally, an unbalanced panel of 30 emerging countries is considered. The results are qualitatively identical for all specifications.;How does foreign aid affect recipient countries' political institutions? Chapter 3 titled, The Amplification Effect: Foreign Aid's Impact on Political Institutions tries to find an answer to this question. Two competing hypotheses offer contradictory predictions. The first sees aid, when delivered correctly, as an important means of making politically-centralized recipient countries more democratic. The second sees aid as a corrosive force on recipient country political institutions that makes them more dictatorial. Our paper offers a third hypothesis about how aid affects recipients' political institutions we call the "amplification effect." We argue that foreign aid has neither the power to make dictatorships more democratic nor to make democracies more dictatorial. Instead, aid only amplifies the existing political institutions of recipient countries. We investigate this hypothesis using a panel that covers 73 countries between 1975 and 2003. Our findings support the amplification effect. Aid strengthens democracy in already democratic countries and dictatorship in already dictatorial regimes. It does not, however, alter the trajectory of political institutions in democratic or dictatorial recipient nations.;Chapter 4 titled, The Role of Political Economy in Corporate Taxation explores the impacts of Formula Apportionment (FA) taxation policy, in the presence of a political economy. The specific formula used to allocate profits of multinational firms for tax purposes will affect the firm's incentive to operate in the country. As a result the choice of a particular formula will also end up having an impact on local consumers, local government and the multinational itself. The different formulas assign different weights to the capital, sales and labor shares of the multinational corporation. Suppose that the choice of the formula is the result of a political process. Which formula would then be chosen by governments representing the interests of domestic consumers, which one would be chosen to represent its own interest and which ones would be chosen to represent the interest of the multinational firm? We present a theoretical model that provides rigorous answers to these questions.