Essays in international trade and firm behaviour

The literature on international trade has witnessed a dramatic change over last two decades where the issues of firm-level heterogeneity has emerged as a core topic. The theoretical framework underpinning the way we understand firms’ engagement in international trade has been essentially encouraged by the seminal studies of Melitz (2003) and Bernard et al. (2003) while, the micro econometrics was pioneered by Bernard et al. (1995), Aw and Hwang (1995) and Roberts and Tybout (1997). Motivated by this substantial and on-going literature, this thesis examines the behaviour of firms in international trade for Turkey. Turkey is an emerging economy with a substantial reliance on the international markets both as a source and an outlet for its domestic economic activities. Over the last decade it has greatly increased its integration into the globalized world economy transforming itself into one of the major recipients of foreign direct investment. In this respect, this thesis adds to the literature with three separate self-contained empirical essays utilizing firm-level data from Turkish manufacturing and services industries. The first essay concentrates on self-selection into trade by exporting and importing firms, and on the presence of differential sunk costs between exporters and importers across different categories of exports and imports. The second essay explores the differentials in the postentry effects of exporting to world markets with different income levels. Controlling for the quality of exports, the chapter examines the extent to which the post-entry effects on the productivity of firms are driven by changes in physical productivity, as opposed to quality/price mark-up effects. The third essay investigates the existence and extent of export spillovers that arise from buyer-supplier relations between domestic and foreign firms; within manufacturing industry and between manufacturing and services industries

Does Foreign Capital Increase Tax Revenue: The Turkish Case

We examine the effect of the foreign direct investment (FDI) on taxes paid for Turkey with a special focus on the differentials between firms operating with different technology levels. We utilize a comprehensive dataset for Turkish manufacturing firms over 2004-2012 period and employ Generalized Method of Moments methodology. The results of the study confirm that foreign affiliation increase the taxes paid by the firms. We find a bigger impact of FDI on taxation for high-technology firms than medium or low technology firms. Keywords: Foreign Direct Investment, Tax Revenue, and Generalized Method of Moments JEL Classifications: D22, F23, H

Gelir hareketliliği gelir eşitsizliğini azaltabilir mi? Türkiye örneği

Gelir hareketliliği kavramı, bireylerin gelir konumlarının daha üst ya da daha alt gelir gruplarına geçişini ve bu geçişin kolaylığını kapsar. Bu çalışma Türkiye için bir gelir eşitsizliği ve gelir hareketliliği incelemesi yaparak gelişmekte olan ülke örneği ile iktisadi yazına katkı sunmayı amaçlamaktadır. Bu amaçla Gelir ve Yaşam Koşulları (GYK) Anketlerinden yararlanılarak 2005- 2010 dönemi için farklı gelir eşitsizliği ve gelir hareketliliği endeksleri hesaplanmıştır. Bu analizin ötesinde söz konusu endeksler ayrıca cinsiyet, değişik yaş ve eğitim düzeyleri için de hesaplanmıştır. Türkiye’de incelenen dönemde gelir eşitsizliğinin oldukça yüksek fakat gelir hareketliliğinin oldukça düşük olduğu görülmektedir. Çalışmadan elde edilen diğer sonuçlar özetle şöyledir: i) Ele alınan dönem uzadıkça gelir hareketliliği artmaktadır ancak Türkiye’de gelir hareketliliği gelir eşitsizliğini azaltıcı nitelikte değildir. ii) Gelir dağılımının en alt ve en üst grupları diğer gruplara göre daha hareketlidir. iii) Ele alınan alt dönemlerde en alt gelir grubundaki bireylerin %6’sı işsiz durumuna düşerken, yalnızca %1.7’si en üst gelir grubuna yükselebilmiştir.Publisher's Versio

Does it matter where you export and does real productivity really rise with exporting?

Utilizing a comprehensive dataset for Turkish manufacturing firms over 2003-2011, we analyse the differentials in the post-entry effects of exporting to markets with different income levels. We employ propensity score matching techniques together with a differences in differences methodology. Controlling for the quality of exports, we explore whether the post-entry effects on productivity are driven by changes in real productivity, as opposed to quality/price markup effects. Our results confirm the learning by exporting hypothesis and suggest real productivity gains in particular for exports to high income (HI) countries as opposed to middle low income (MLI) countries even after controlling for the composition of exports. This suggests that where a firm exports does matter

Wage Inequality and Wage Mobility in Turkey

This paper investigates wage inequality and wage mobility in Turkey using the Surveys on Income and Living Conditions (SILC). This is the first paper that explores wage mobility for Turkey. It differs from the existing literature by providing analyses of wage inequality and wage mobility over various socioeconomic groups such as gender, age, education and sector of economic activity. We first present an overview of the evolution of wages and wage inequality over the period 2005-2011. Next, we compute several measures of wage mobility and explore the link between wage inequality and wage mobility. Further, we compute the transition matrices which show movements of individuals across the wage distribution from one period to another and investigate the determinants of transition probabilities using a multinomial logit model. The results show that overall the real wages increased over the study period and wage inequality exhibits a slight increase.. Wage inequality is one of the highest among the European Union (EU) countries. The wage mobility in Turkey is lower than what is observed in the European Union countries although it increases as time horizon expands. Wage mobility has an equalizing impact on the wage distribution, however; this impact is not substantial enough to overcome the high and persistent wage inequality in Turkey

Engagement in Asymmetric Markets: Causes and Consequences

This paper contributes to the emprical debate on firm heterogeneity in international trade dealing with the direction of causality from which the performance premium across destination markets originates. For this purpose, we first investigate the selection of firms into markets with asymmetric income levels exploring which firm level characteristics are associated with this selection. Once we identify movements along different statuses on a year to year basis we investigate the factors that drive these movements. We search for the heterogeneity in post-entry effects of trading with different type of markets by establishing treatment models in line with the learning by exporting hypothesis. Our results indicate self-selection mechanisms and post-entry effects differ from market to market for Turkish manufacturing firms

Does it matter where you export and does real productivity really rise with exporting?

Utilizing a comprehensive dataset for Turkish manufacturing firms over 2003-2011, we analyse the differentials in the post-entry effects of exporting to markets with different income levels. We employ propensity score matching techniques together with a differences in differences methodology. Controlling for the quality of exports, we explore whether the post-entry effects on productivity are driven by changes in real productivity, as opposed to quality/price markup effects. Our results confirm the learning by exporting hypothesis and suggest real productivity gains in particular for exports to high income (HI) countries as opposed to middle low income (MLI) countries even after controlling for the composition of exports. This suggests that where a firm exports does matter

Engagement in Asymmetric Markets: Causes and Consequences

This paper contributes to the emprical debate on firm heterogeneity in international trade dealing with the direction of causality from which the performance premium across destination markets originates. For this purpose, we first investigate the selection of firms into markets with asymmetric income levels exploring which firm level characteristics are associated with this selection. Once we identify movements along different statuses on a year to year basis we investigate the factors that drive these movements. We search for the heterogeneity in post-entry effects of trading with different type of markets by establishing treatment models in line with the learning by exporting hypothesis. Our results indicate self-selection mechanisms and post-entry effects differ from market to market for Turkish manufacturing firms

Dynamic analysis of employment and domestic value added generated by foreign demand in Turkey

The aim of this paper is to analyze the change in the employment generation potential of exports at the sectoral level for recent years by using the input-output methodology. Indirect and direct "wage-share" of one unit of exports are estimated by using the input-output table of 2002 and the sectoral Trade in Value Added (TiVA) statistics. Our estimation results show that the average wage content of one unit of exported product, which is used as a proxy for the employment generated by exports, decreased between the years 1995 and 2008. The falling domestic value added (DVA) component of exports is responsible for this weakening role of exports in employment generation. The firm level data indicate similar results in terms of the direct domestic value added and employment effects of exports for the period 2003-2012. However, the firm level data also suggest the possibility of an increase in the indirect domestic value added and employment generated by exports due to the decrease in the imported intermediate input content of output by exporter firms in recent years.Publisher's Versio

The Effect of Innovation on Productivity: Evidence from Turkish Manufacturing Firms

This paper explores the effects of firms’ innovation activities on their productivity changes systematically for Turkish manufacturing firms differentiating between different typologies of innovation. To do so, we utilize a recent and comprehensive firm level dataset over the period 2003-2014, mainly constructed on the four consecutive waves of the “Community Innovation Surveys”. We employ endogenous switching methodology controlling for endogeneity and selection bias issues as well as analyzing counterfactual scenarios. The main finding of the study points to firm heterogeneity in terms of both propensity to innovate and their benefiting from innovation activities. Our results indicate that all types of innovation activity have positive effects on the productivity of firms with respect to non-innovating firms. Further, we find robust evidence for the differential impact of innovation on firm productivity across different innovation types