This dissertation studies several important issues in developing countries. The first essay focuses on rural-urban migration and rural entrepreneurship in China. I find that depending on the initial human capital level, policies aiming to advance human capital may have different impacts on migration. Even though return migrants help raise rural labor demand and wages, the income inequality between the urban and rural areas is not eliminated and migration is persistent. The borrowing constraints limit the size of rural non-farm businesses and slow down the development of the rural industry. The second essay studies the dynamics of rural-urban migration income and rural non-farm business ownership in China, applying a dynamic bivariate probit model to the China Rural Households Survey Data. The positive correlation between receiving migration remittances in one period and operating rural non-farm business in the following period is explained by correlated unobserved heterogeneity. A negative state dependence between receiving migration remittances and operating rural non-farm businesses can be justified by the time and labor constraints facing rural households. The third essay provides a theoretical study of teacher absenteeism, a severe phenomenon in many less developed countries. I focus on several policies, such as labor taxes, financial penalties, and teachers’ wage rate, to examine the short-run and long-run effects of these policies on teacher absenteeism, economic growth, goods production, and quality of lower and higher education.