Economics

Publications of our current faculty members can be found here.

Econometrics is a science that examines the relationship between observations of various subjects (economics, people, etc.) using mathematics and statistics within the framework of a causality. Time series analysis is a sub-branch of econometrics and is the general name of the methods used to model and forecast the behavior of economic variables (production, inflation, income inequality, etc.) measured periodically (monthly, yearly, etc.).

Related Research:

Bootstrap Inference of Level Relationships in the Presence of Serially Correlated Errors: A Large Scale Simulation Study and an Application in Energy Demand (Assoc. Prof. Talha Yalta)

By undertaking a large scale simulation study, we demonstrate that the maximum entropy bootstrap (meboot) data generation process can provide accurate and narrow parameter confidence intervals in models with combinations of stationary and nonstationary variables, under both low and high degrees of autocorrelation. The relatively small sample sizes in which meboot performs particularly well make it a useful tool for rolling window estimation. As a case study, we analyze the evolution of the price and income elasticities of import demand for crude oil in Turkey by using quarterly data between 1996 - 2011. Our approach can be employed to tackle a wide range of macroeconometric estimation problems where small sample sizes are a common issue. 

Has the Forecasting Performance of the Federal Reserve’s Greenbooks Changed over Time? (Assoc. Prof. Ozan Ekşi, Prof. Bedri Kamil Onur Taş)

We investigate how the forecasting performance of the Federal Reserve Greenbooks has changed relative to commercial forecasters between 1974 and 2009. To this end, we analyze time-variation in the Greenbook coefficients in forecast encompassing regressions. Assuming that model coefficients change continuously, we estimate unobserved components models using Bayesian inference techniques. To verify that our results do not depend on the specific way change is modeled, we also allow the coefficients to change discretely rather than continuously and test for structural breaks using classical inference techniques. We find that the Greenbook forecasts have been consistently superior to the commercial forecasts at all horizons throughout our sample period. Although the forecasting performance gap has narrowed at more distant horizons after the early-to-mid 1980s, it remains significant.

Lower Volatility, Higher Inequality: Are They Related? (Assoc. Prof. Ozan Ekşi)

We investigate the relationship between GDP volatility and income inequality to explain the changes in both variables in the last decades of 20th century. The theoretical results show that these variables are related to the same parameters of the underlying income microdata. These results are supported by two empirical findings: (i) the simultaneity of the structural breaks in the GDP volatility and income inequality series across five industrialized countries; and (ii) the consistency of the results obtained from decomposing the US GDP volatility and income inequality data with those obtained from the US income microdata. The latter finding explains the diverging trends of the variables during the Great Moderation era. It also finds support for the argument that income inequality gives long-lasting responses to structural economic changes.  

Microeconomics is the discipline that examines the decision-making behaviors of small-scale agents such as individuals and firms and the effects of these behaviors on the distribution of resources in the country. The microeconomics field is summarized below under various subheadings. Game theory, behavioral and experimental economics, industrial organization, health, education, and welfare economics, labor economics are directly sub-branches of microeconomics, while the other sub-headings listed below are within the discipline of microeconomics as long as they examine individual decision-making.

The theory that economists call “Game Theory” and psychologists call “Theory of Social Situation” is based on predictable interactions between at least two people. Game theory deals with the rational strategies of individuals or groups and the consequences of these strategies when the outcome of an action chosen by one individual depends on the actions chosen by other individuals. Information Economics is a sub-branch of game theory. For example, in the information economy, how willing companies are to collect or share private information under demand or cost uncertainties, the effects of private information collection on the welfare of consumers and community or how much beneficial public information shared by the central banks and government agencies to the market are tried to be explained with game theoretical modeling. Auction Theory, as a sub-branch of game theory, examines the various types of auctions, which can be held by many different rules and methods, in terms of the behavior of potential buyers, the revenue earned by the seller, and social welfare.

Related Research:

Acquisition, Aggregation, and Sharing of Information in Stackelberg Markets (Asst. Prof. Eray Cumbul)

Consider a Stackelberg market where n firms have private demand information and compete in quantities sequentially. We first show that large Stackelberg markets aggregate information efficiently. Moreover, expected total welfare increases when all firms have more precise information, or all firms share their information only with their followers or with each other. The first n-1 firms have incentives to share their information with their follower(s) when n=2 or the ratio of the signals' precision to the prior's precision is low enough. No-sharing is optimal if otherwise. Lastly, when n=2, more imprecise own information is beneficial to a firm if and only if the precision of the follower's signal (τ2) is low enough. Whereas expected consumer and total surpluses increase with τ2, they may decrease with the precisions of the public signal or the leader's signal at some intermediate values of τ2. As a more precise public signal induces a greater output distortion, the central banks should be careful in balancing the benefits of greater transparency with the perceived risks of over-communication.

Effects of Resale in Second-Price Auctions with Private Participation Costs (Asst. Prof. Ethem Akyol)

We consider second-price auctions with participation costs and investigate the effects of resale after an auction. There are two potential bidders whose valuations are commonly known. Bidders incur a privately known cost to participate in the auction. We examine how resale affects bidders’ entry behavior, seller’s expected revenue, and social welfare. We show that resale increases (decreases) entry by the lower-(higher-)value bidder, inducing a “more symmetric” equilibrium, and generates higher revenue for the seller. Furthermore, while resale may be detrimental to ex post welfare, it always increases the ex ante welfare.

Disappearance of Reputations in Two-Sided Incomplete-Information Games (Asst. Prof. Ayça Özdoğan Atabay)

This paper examines the sustainability of reputations in a class of games with imperfect public monitoring and two long-lived players, both of whom have private information about their own type and uncertainty over the types of the other player. This class, namely reputation games with one-sided moral hazard, can capture economic interactions that may involve hidden-information or hidden-action. Extending the techniques of Cripps et al. (2004), it is found that neither player can sustain a reputation permanently for playing a noncredible behavior in these games; and, the reputations disappear uniformly across all Nash equilibria.  

In these sub-branches of economics, theories are put forward to understand people's understanding, learning and decision-making processes and these theories are tested on a subject group in a laboratory environment. Thus, assumptions related to the behavior of economic agents that are used in economic theories and which are “assumed to be true” can be developed. The research areas of experimental economics are markets, games, decision-making, bargaining, auctions, social preferences, learning, matching and field experiments.

Related Research:

Truth-Telling and Trust in Sender–Receiver Games with Intervention: An Experimental Study (Prof. İsmail Sağlam, Asst. Prof. Ayça Özdoğan Atabay)

Recent experimental studies find excessive truth-telling in sender–receiver games. We show that this phenomenon is robust to the random intervention of a truthful regulator. In addition, intervention significantly increases the excessive trust of receivers while the overall percentage of truthful messages received does not change much with or without intervention. We offer a theoretical explanation for the behavior of senders and receivers, using a logit agent quantal response equilibrium (logit-AQRE) model incorporating a non-monetary lying cost for senders (like Peeters et al. in Scand J Econ 115(2):508–548, 2013). We show that our experimental findings are all consistent with the predictions of this model. Moreover, we find that the lying cost is significantly higher under intervention, implying that truthful intervention is beneficial for receivers and justified as a tool for policy makers acting on behalf of informationally inferior parties.

Fines versus Prison for the Issuance of Bad Checks: Evidence from a Policy Shift in Turkey (Assoc. Prof. Ozan Ekşi)

We investigate whether the February 2012 amendments to the Check Law in Turkey that replaced imprisonment with administrative fines for issuing bad checks were a driver of the surge in bad checks since late 2011. As the change in the law was foreseen, we argue that check issuance behavior was altered before the new law became official. To capture this, we use the cumulative volume of internet search queries related to the upcoming legal change. We find that, unlike the case during the global financial crisis of 2008–09, the surge in bad checks occurring in 2011–12 cannot be accounted for by the state of the economic environment unless the effects of the February 2012 law change are also controlled for. We also provide evidence that economic agents adjust fairly rapidly to the legal change, which reverses the surge in bad checks within a year. Overall, our findings suggest that sanctions need not be harsh to deter non-violent offenses provided that appropriate institutional structures are in place.

Industrial organization deals with the subjects like firm structures of companies, strategic firm decisions, imperfect forms of competition in the markets, regulation and antritrust policies. The industrial organization applies the price theory to the markets. Economists working in the field of industrial organization try to show by which methods industries work, how industries can increase their contribution to public welfare and how these industries can improve with government policies.

Related Research:

Multilateral Limit Pricing in Price-Setting Games (Asst. Prof. Eray Cumbul)

In this paper, we characterize the set of pure strategy undominated equilibria in differentiated Bertrand oligopolies with linear demand and constant unit costs when firms may prefer not to produce. When all firms are active, there is a unique equilibrium. However, there is a continuum of non-equivalent Bertrand equilibria on a wide range of parameter values when the number of firms (n) is more than two and n*∈ [2,n-1] firms are active. In each such equilibrium, the firms that are relatively more cost or quality efficient limit their prices to induce the exit of their rival(s). When n>2, this game do not need to satisfy supermodularity, the single-crossing property (SCP), or log-supermodularity (LS). Moreover, the best responses might have negative slopes. These results are very different from those in the existing literature on Bertrand models with differentiated products, where uniqueness, supermodularity, the SCP, and LS usually hold under a linear market demand assumption, and best response functions slope upward. Our main results extend to a Stackelberg entry game where some established incumbents first set their prices, and then a potential entrant sets its price.

Ranking Supply Function and Cournot Equilibria in a Differentiated Product Duopoly with Demand Uncertainty (Prof. İsmail Sağlam)

In this paper, we provide a welfare ranking for the equilibria of the supply function and quantity competitions in a differentiated product duopoly with demand uncertainty. We prove that the expected consumer surplus is always higher under the supply function competition, irrespective of whether the (duopolistic) products are substitutes, complements, or independent. Numerical simulations suggest that if the products are either complements or independent, or if they have an extremely low degree of substitution, then the supply function competition can always be Pareto superior to the quantity competition in terms of the producers’ and consumers’ welfares. Moreover, if the degree of product substitution is not extremely low, then the supply function competition can be Pareto superior to the quantity competition if and only if the size of the demand uncertainty is sufficiently large to exceed a critical level. We find that this critical level of demand uncertainty becomes higher when the duopolistic products are less differentiated. Additionally, this critical level is nonincreasing both in the marginal cost of producing a unit output and in the own-price sensitivity of each inverse demand curve when all other parameters are fixed. Our results imply that in electricity markets with differentiated products, the regulators should not intervene to impose the quantity competition in favor of the supply function competition unless the degree of product substitution is sufficiently high and the predicted demand fluctuations are sufficiently small.

Stackelberg versus Cournot Oligopoly with Private Information (Asst. Prof. Eray Cumbul)

In this paper, we compare an n-firm Cournot model with a Stackelberg model, where n-firms choose outputs sequentially, in a stochastic demand environment with private information. The Stackelberg perfect revealing equilibrium (SPRE) expected total output, consumer surplus, and total surplus are lower while expected price and total profits are higher than the Cournot equilibrium ones. These rankings are the opposite to the rankings of prices, total output, surplus, and profits under perfect information. We also show that the first n-1 firms' expected profits form a decreasing sequence from the first to the (n-1)st in the Stackelberg game. The last mover earns more expected profit than the first mover if n<5 or the ratio of the signals' informativeness to the demand certainty is low enough. Lastly, there is a discontinuity between the Stackelberg equilibrium of the perfect information game and the limit of Stackelberg perfect revealing equilibria as the noise of the demand information of all firms vanishes to zero at the same rate. Various robustness checks for the results are provided when the precision of signals are asymmetric, there is public information or cost/quality uncertainty, or the products are differentiated.

Macroeconomics is the sub-branch of the economy that deals with the economy as a whole. It examines the issues related to the total economic activities of a country or region such as economic growth, inflation, total industrial production. Macroeconomic models are used to make holistic analyzes on the economy by government institutions, policy makers, financial institutions, international organizations and companies.

Related Research:

Crisis and Self-Fulfilling Expectations: The Turkish Experience in 1994 and 2000–2001 (Asst. Prof. Ünay Tamgaç Tezcan)

In this paper we analyze the role of fundamentals and self-fulfilling expectations in the crisis episodes of  Turkey in 1994 and 2001. The question is how much of the occurrence of a crisis can be attributed to market expectations and how much to fundamentals. The model is estimated using a Markov switching framework in which the devaluation expectations affect crisis probability via three different specifications. Such a framework which allows for sunspots performs better than a purely fundamental-based model. The study shows that besides the fundamentals in the economy, shifts in agents' devaluation expectations have played a crucial role and that a Markov switching model with constant transition probabilities provides better estimates for the Turkish currency crises.

Unconventional Monetary Policy and the Stock Market’s Reaction to Federal Reserve Policy Actions (Assoc. Prof. Ozan Ekşi, Prof. Bedri Kamil Onur Taş)

We examine the change in the effect of Federal Reserve’s policy actions on stock returns after the Fed started to use unconventional policy actions. We find that the response of stock returns to monetary policy actions are almost seven times higher after the federal funds rate hit the zero lower bound. We conduct additional analysis to examine the underlying causes of the increase in the impact of monetary policy actions of stock returns. We show that investors rebalance their portfolios towards equity after selling Treasury securities to the Federal Reserve during large scale asset purchases.

Turkey’s Distressing Dance with Capital Flows (Prof. Fatih Özatay)

In the aftermath of the 2001 crisis, Turkey took important steps toward achieving macroeconomic and financial stability. Together with favorable international financial conditions, this helped to achieve a high per capita GDP growth. The high-growth period failed to be sustainable, however. From 2008 to 2013, Turkey had a volatile and low growth. In this article, I aim to analyze the underlying reasons of high volatility of growth and discuss short-term economic policy alternatives to mitigate such undesired fluctuations.

Monetary economics is related to the effects of institutions and policy that can affect monetary aggregates on economic variables such as commodity prices, wages, interest rates, employment quantity, consumption and production. The main topics covered are money demand, money supply, financial crises, central bank and banking system, monetary policy tools and objectives, maturity and risk structures of interest rates.

Related Research:

International Monetary Policy Coordination through Communication: Chasing the Loch Ness Monster (Prof. Bedri Kamil Onur Taş)

We empirically examine international monetary policy coordination. We use the Global Economy Meetings (GEMs) at the Bank for International Settlements (BIS) to design a novel empirical identification strategy. We find that communication between the central bank governors at the BIS GEMs promotes policy coordination.

International Monetary Coordination and the Financial Crisis: A Network Analysis (Prof. Bedri Kamil Onur Taş)

We empirically examine international monetary coordination by identifying the network structure of four major central banks: The Bank of England, Bank of Japan, European Central Bank and Federal Reserve Bank. We calculate the time-varying connectedness measure developed by Diebold and Yilmaz (2005). Specifically, we investigate the interdependence of monetary policy actions and how the interaction between these central banks change over time. The construction of the network structure for different time periods allows to study the effect of the 2008 financial crisis. We investigate the structural break dates for the network structure to determine the exact dates of convergence and decoupling of monetary policy. The empirical analysis shows that monetary policy interdependence is higher for the October 2008-July 2013 period.

Monetary Economics: Theory and Politics (Book in Turkish), Efil Yayınevi Yayınları (Prof. Fatih Özatay)

Endogenous Markups in the New Keynesian Model: Implications for Inflation–Output Trade-Off and Welfare (Assoc. Prof. Ozan Ekşi)

This paper extends the standard new Keynesian (NK) model by using the endogenous markup setting a la Kimball (1995). In this setting, consumers' price elasticity of demand for a good is increasing in the good's relative price level, which affects the desired price markup of firms. In the literature, this setting is mainly used to improve the NK models in matching sluggishness of prices in the data. Our paper analyzes the monetary policy implications of the model. It is shown that unlike the cases of real wage rigidity and exogenous markup shocks, the endogenous markup setting does not improve the NK models in generating the inflation–output trade-off. It is also discussed that the optimal monetary policy in this environment is to target the flexible price equilibrium.

Financial markets serve to transfer funds to areas that need investment. Through such transfers, financial markets increase economic efficiency. It allows the funds to be allocated for their most efficient use and for consumers to consume more timely.

Related Research:

Wash Trades as a Stock Market Manipulation Tool (Prof. Bedri Kamil Onur Taş)

This study empirically investigates the profitability of one of the most widely used trade-based manipulation tools, namely the wash trading. Using a unique account level dataset over the 2003-2006 period from the Istanbul Stock Exchange (ISE), we generate a measure for usage of wash sales for each individual account and check whether dealing with wash trading provides any excess return for the investors. Empirical results reveal that significant number of investors perform wash sales and having up to 30% of the total trades as wash sales provides excess profit whereas using up to 10% is the most profitable range with a 0.5% monthly excess return. Consistent with previous studies, trade-based manipulation is commonly seen at illiquid segment of the stock market, but on the other hand our results show that wash trading is profitable for the most liquid stocks while not for the most illiquid segment.

Financial Crises and Turkey, Fatih Özatay, Doğan Kitap Yayınları, (Book in Turkish)

Duration of Fixed Exchange Rate Regimes in Emerging Economies (Asst. Prof. Ünay Tamgaç Tezcan)

This paper examines the duration of fixed exchange rate regimes and investigates whether there is a certain pattern of time dependence in the survival rate of pegged exchange rate regimes for emerging economies. We query why some fixed regimes last longer and determine the macroeconomic, social and political factors that make a pegged regime more durable. We use survival analysis, a technique which accounts for the unobservable cumulative effects associated with maintaining a fixed exchange rate that build up over the duration of a regime. In our model, time enters as a proxy for these unobserved persistent effects as we investigate the relative importance of the fundamentals in the economy on regime durability by considering their relation together with the effect of time itself. Using the de facto exchange rate regime classification proposed by Reinhart and Rogoff (2004), we find non-monotonic duration dependence and show that time is a significant factor for the duration of pegged regimes. Openness, changes in foreign reserves, growth, real exchange rate misalignment, claims on government and sociopolitical instability are also found to influence the pegged regime duration.

Perverse Effects of Non-sterilized Interventions on Spot Foreign Exchange Rates (Prof. İsmail Sağlam)

We study the effects of non-sterilized intervention on a spot foreign exchange (forex) rate using a multi-period game-theoretical model which involves an unspecified number of competitive traders, a finite number of strategic traders (forex dealers) with heterogenous initial money balances, and the central bank of the home country. Simulating the subgame-perfect Nash equilibrium of the two-stage game played by the forex dealers in each period, we show that the non-sterilized intervention of the central bank may lead to a perverse effect on the spot forex rate. We call the mechanism underlying this effect strategic trade switching channel that works when an increase in the central bank’s forex currency demand (supply) exerts such a big upward (downward) effect on the forex rate that some sufficiently big dealers, who optimally bought (sold) forex currency in the previous period when the forex rate was sufficiently low, find in the current period selling (buying) it more profitable, thus moving the forex rate in a direction undesired by the central bank.

The field of international economics covers both international financial transactions and international trade in goods and services. International trade theory is the branch of economic theory, which is related to the trade between nations and more broadly all aspects of economic relations between nations.

Related Research:

Behavior of Remittances from Turkish Workers in Germany over the Business Cycles in Turkey and Germany: An Econometric Analysis (Prof. Serdar Sayan)

Workers' remittances are defined as the funds that migrant workers transfer to their countries of origin for family support or investment purposes.  Workers' remittances may fluctuate around a long-term trend in either direction, depending on the nature of their co-movements with the business cycles in home and host countries. This paper investigates the relationship between fluctuations in Turkish workers' remittances transferred from Germany to Turkey and business cycles in the Turkish and German economies by using different econometric techniques. Our results indicate that remittance cycles and Turkish business cycles are procyclical, with Turkish business cycles leading the remittance cycles by about a quarter, whereas workers' remittance cycles appear to be acyclical with German business cycles. These results hint that remittances from Turkish workers in Germany are not motivated mainly by the migrant workers' desire to support family members left behind. Instead, they transfer their savings back mostly for investment purposes.

Does Financial Liberalization Decrease Capital Flight? A Panel Causality Analysis (Assoc. Prof. Talha Yalta)

We employ a panel causality approach in order to examine whether financial liberalization affects the magnitude of capital flight, which measures unrecorded accumulation of foreign assets by the private sector. Our data from 21 emerging market economies for the period between 1980 and 2004 show no significant evidence of a causal relationship. Lagged values of capital flight, however, seem to increase its current level, indicating its self-reinforcing characteristic. Our results suggest that financial liberalization policies per se may not be helpful in reducing capital flight.

The public economics explores the efficiency of public policies and the most economical use of public resources.

Related Research:

Sovereign Risk, Public Debt, Dollarization, and the Output Effects of Fiscal Austerity (Prof. Fatih Özatay)

The goal of this paper is to investigate effects of fiscal policy on output as a response to an external shock at different levels and currency compositions of public debt. Central to our analysis is the mutual relationship between sovereign risk and public debt on the one hand, and the linkage between sovereign risk and private credit spreads on the other. We show that fiscal austerity is conducive to real economic activity when initial government debt is high, its foreign currency share is important, and the link between sovereign and corporate spreads is strong.

Optimal Bidder Participation in Public Procurement Auctions (Prof. Bedri Kamil Onur Taş)

This paper empirically identifies the optimal number of bidders to achieve the lowest procurement prices in public procurement auctions. We examine a unique data set that covers all Turkish government procurement auctions comprising more than half a million observations for the period 2005–2012. We present a novel and easy-to-implement method to investigate the number of bidders required for the public procurement markets to be competitive. Our results suggest that procurement costs decrease until six to eight bidders. Policy makers can employ the method to investigate the optimal number of bidders and design policies to promote competition. Moreover, policy makers can also make use of the optimal numbers as focal points to inspect whether competitive efficiency is achieved in public procurement auctions.

Regulating a Manager‐controlled Natural Monopoly with Unknown Costs (Prof. İsmail Sağlam)

We study the regulation of a manager‐controlled natural monopoly with unknown costs, borrowing from Baron and Myerson (BM) (1982), where the monopoly is controlled by the owner. We consider the case where the regulator can tax the owner as well as the case where she cannot. We find that the optimal price schedule generally lies below the one in the BM model and that it can be as low as the marginal cost if the compensation parameter is sufficiently small and the regulator cannot tax the monopoly owner. We also identify the cases where the monopoly owner prefers to delegate the control to a manager.

Human capital refers to the total of the knowledge, experience and ability accumulation of individuals in the country as the labor force. The way to break the poverty trap at the country level (macro) and individual level (micro) is to increase the productivity and thus the income level of individuals by supporting the accumulation of human capital. Education and health support economic growth by increasing human capital and labor productivity. Health economics aims to produce the highest and fair level of health service by using the resources allocated to the health sector in the most economical (efficient, effective, rational) way. Similarly, Education economy examines the financial aspects of education, and most importantly, the impact of educational processes on the human capital accumulation and by this way the impact on the individual and on economic development.

Related Research:

Higher Education in Turkey: Subsidizing the Rich or the Poor? (Prof. Asena Caner)

We investigate how the benefits of publicly financed higher education in Turkey are distributed among students with different socioeconomic backgrounds. We use a dataset from a nationally representative sample of university entrance exam takers together with data on government subsidies to public universities. We compare the characteristics of students who succeed in the exam to those who do not and those who enter public universities to those who go to private ones. Our econometric analyses based on a threestage selection model reveal that students from wealthier and more educated families are more likely to be successful at university entrance. Unlike the findings in other countries, students who enroll in private universities come from higher income and more educated families. Among those who enter public universities, students from higher income and better educated families are more likely to go to universities that receive larger subsidies from the government.

Children of Crisis: The Effects of Economic Shocks on Newborns (Asst. Prof. Belgi Turan)

In this paper, we explore the deep economic crisis experienced by the Turkish economy in 2001 and 2008 as quasi-experiments to causally identify the association between economically challenging conditions in-utero and child's birth weight. First, we utilize the temporal and spatial variations of the economic crisis. Second, we estimate mother fixed effects models by exploring the variation in the birth weight of siblings by their in-utero exposure to economic downturn. Using the Turkish Demographic Health Surveys (DHS), we find that a higher regional GDP contributes significantly to better birth outcomes among crisis-time children; adverse health effects are mainly observed in children born to mothers with low socio-economic status, suggesting that the main driver of the estimated effects of economic crises in Turkey is credit constraints. Our mother fixed effects models reveal that selective fertility, abortion, and unobserved heterogeneity across mothers are important omitted variables in the interpretation of regional regressions. The estimated effects of economic downturns cease to be statistically and economically significant once we control more accurately and directly for a family's firsthand experience with economic recessions. Thus, our results demonstrate that regional-level regressions estimating potential infant health costs of economic recessions potentially overestimate the true effects, and more direct measures of unobserved heterogeneity should also be considered in these analyses.

Does Poverty Among Immigrants Adapt to Country of Residence? Turks in Germany and Denmark (Prof. Asena Caner)

We use data on Turkish immigrants in two European welfare states, Denmark and Germany, and data on Turks at home. Unlike in most studies of immigrant poverty, we thus control for the differences in immigrant composition. Denmark and Germany have different welfare state types, labour market structure and institutions. We find that in both countries Turkish immigrants have much higher poverty rates than natives. We perform Fairlie decompositions to find that in Denmark, compared to Germany, a larger part of the native‐immigrant poverty difference is explained by market valuation of characteristics and by unobservables. Finally, we decompose poverty by subgroups and find that certain immigrant subgroups (such as families with children and the elderly) are especially vulnerable in both countries and that not much has changed in the two countries between 2008 and 2013 in terms of the vulnerability of these sub‐groups to poverty risk.

Life Satisfaction and Keeping Up with Other Countries (Assoc. Prof. Ozan Ekşi)

Micro income studies show that relative income of individuals—with respect to their colleagues, friends, etc.—affects their life satisfaction significantly. This paper attempts to extend these studies by using the idea that people may compare their well-being not only to well-being of their home country folks but also to well-being of other country citizens. Using data from national surveys of 55 countries, carried out from 1973 to 2011, we find that average life satisfaction of a country is significantly affected from how much that country is deprived of income compared to richer countries in the world. Furthermore, per capita income of a country only matters as far as it affects its relative position in the global income distribution. This result, gaining statistical significance after 1990s, is a potential explanation for the paradox that even though richer countries tend to be happier compared to poor ones, a country does not necessarily get happier as its income increases.

Labor economics is an area that examines the determinants of supply and labor demand for the labor force, unemployment, employment and wage dynamics resulting from the supply and demand equilibrium, career choices of individuals, and investments in human capital, quality mismatch, employer-employee relations and the causes and effects of discrimination in the workplace. The impact of migration movements on the labor markets due to migration crises in the world in recent years is among the topics that are often studied in the labor economics. Another research topic that has gained importance in this field in recent years is women employment and female labor force participation.

Related Research:

The Impact of the Turkish Employment Subsidy Programs in Increasing the Level of Social Protection for Women (Asst. Prof. Belgi Turan)

This paper investigates the impact of the employment subsidy program implemented in 2008 in Turkey on women’s transition to formal employment. More precisely, using a nationally representative individual-level panel data, we analyze the impact of the program on formal and informal employment of women by checking the transitions in the labor market states. Using difference-in-differences (DID) estimation technique with the flow and stock data, we assess the effectiveness of the policy by analyzing the switches from informal employment, from unemployment and from out of the labor force to formal employment. Our results indicate that the reform did not effectively increase the employment probabilities of women compared to men who are not eligible to benefit from the program. But the formality of women in the labor market increased significantly suggesting an expansion in the social security coverage of women in Turkey.

Life Expectancy and Economic Development: Evidence from Micro Data (Asst. Prof. Güneş A. Aşık)

Using birth and sibling histories from Demographic Health Surveys conducted in sub-Saharan Africa, I construct age-specific birth rates and age-specific mortality rates at the country-region level. I use this data to test the implications of a general equilibrium model linking life expectancy to fertility, education, and labor supply. My results suggest that increases in life expectancy reduce fertility, increase education, and increase labor force participation for both females and males. Overall, my empirical results suggest that in sub-Saharan Africa, increases in life expectancy will have a positive impact on growth through fertility and education and labor supply, but the effect will be small.        

An Analysis of Labor Earnings in Turkey: 2002-2011 (Assoc. Prof. Ozan Ekşi)

This study documents the evolution of hourly wages and annual labor earnings, as well as the inequality in these measures, in Turkey between 2002 and 2011. The findings indicate that in this period the median hourly wages of men aged 25 to 49 living in urban areas and working as wage-earners increase by 34%, whereas their median annual labor earnings increase by 43% – which means that for this demographic group while the increase in annual labor earnings is in par with the the increase in the real GDP per capita (41%) during this period, the increase in hourly wages lag behind. The results also indicate a decline in both wage and labor-earnings inequali-ties between 2002 and 2005. However, after 2005, we observe almost stable wage inequality but an increase in the labor-earnings inequality, which is brought about by the increase in both the variance of log annual hours and the covariance between log annual hours and log hourly wage rate. In addition, this study presents the evolution of hourly wages and annual labor earnings by age and by education during the same time period.

Economic development is the improvement of standard of living of a society, and the advancement in terms of economic, social and political aspects, health and education. Along with the development, besides the numerical development in the economy, it is discussed that social and political institutions change and develop structurally. Issues such as measuring the poverty level and inequality in a society, their change over time, and the reasons of the change can also be addressed under the title of development economics. Economic growth is a numerical measure of the income and output growth in the country.

Related Research:

Beklenen Yaşam Süresi ve Kalkınma Göstergeleri (Asst. Prof. Belgi Turan)