Essays in Applied Economics

The present thesis consists of three independent chapters. The first chapter analyses the effect of religiosity on innovativeness. The empirical literature on the relation between religion and innovation hitherto applied regressions without considering endogeneity in the estimates, rais- ing questions about spurious correlations. This chapter provides the first empirical study to build a causal link between religion and innovation by employing the instrumental variables method to untangle possible endogeneity. The results strongly suggest that higher religiosity has a somewhat negative effect on innovativeness. Three possible causality channels from reli- giosity to innovation are discussed: time allocation argument, the fear of uncertainty, and tra- ditional roles empowered by religion. The second chapter explores the importance of regional capabilities, in the form of workplace skills, in the industrial diversification process of regions by exploiting two recently developed approaches: relatedness and economic complexity. Build- ing on the network-based approach of evolutionary economic geography, the study shows that workplace skills form two highly polarised clusters into social-cognitive and technical-physical skills. The econometric analysis indicates that industries have a higher (lower) probability of developing a comparative advantage if their required skill set is (not) similar to those available in the region, regardless of the skill type. Nevertheless, similarity to technical-physical skills and higher complexity in social cognitive skills yield the highest regional competitive advan- tage probabilities. The third chapter analyses the Ramsey pricing of pharmaceuticals by using recently developed the debiased/double orthogonal machine learning method that allows for heterogeneous treatments in a dynamic panel setting. The study assesses the validity of the inverse elasticity rule by providing a cross-country analysis of pharmaceutical demand at the molecule level. The results show that pharmaceutical prices vary inversely with price elastici- ties, both in high-income and low-middle-income countries, signalling the existence of Ramsey pricing.