Essays in applied macroeconomics

Official URL: http://risc01.sabanciuniv.edu/record=b1630631 (Table of Contents)

This dissertation consists of two chapters each of which investigates different questions in quantitative macroeconomics. In the first chapter, I scrutinize the regional (EU including Turkey) and locational economic implications of removing barriers to labor mobility between Turkey and the EU. I use the growth model with endogenous labor movements developed in Klein and Ventura (2009). I set model parameters so that the model economy is consistent with EU and Turkish economies in 2010. Findings show that removing barriers to labor mobility, fully and partially, generates regional output growth in the long-run at range 6.2%-8% while growth in regional capital is between 6%-8%. Besides, welfare gains for young natives in Turkey are at range 1.06%-2.04%. Yet, young natives in the EU are exposed to welfare losses which changes between 0.08% and 0.13%. In the second chapter, I explore the quantitative role of financial development in the rise of residual wage inequality in the US. I built an incomplete-markets model in which homogenous workers work in firms possessing heterogeneous investment efficiency. Labor and financial markets are frictional. Financial development means an increase in firms capacity to borrow. I set model parameters so that the benchmark economy -that is pre-financial development economy- is consistent with the US economy in between 1974Q1-1979Q4. Findings show that variance of wages increase by 2.8% after financial development. However, variance of log-wages decreases by 8.6% suggesting that there is a large increase in average wage as a result of overall improvement in the economy after financial development.