Essays on international economics

This dissertation consists of three essays on international economics. In the rst chapter, the long-run e ects of trade liberalization and trade-induced skill-biased technological change on wages and unemployment are studied by augmenting a heterogeneous rm trade model with job search and unemployment. The model predicts that trade liberalization has asymmetric wage effects on the two types of workers: it increases wage inequality in favor of skilled workers. Also, unemployment rate in the skilled-labor market falls to a greater extent, implying a change in the skill composition of unemployment in both trade partners. The second chapter aims to unearth the underlying causes of high levels of the current account de cit by investigating the export performance of Turkish rms. First, a cross-country analysis reveals that Turkey performs poorly compared to its competitors in generating a suitable business environment, promoting innovation and skills, and providing easier access to nance all of which are known to contribute signi cantly to stimulating export performance. Using a data set from the Productivity and the Investment Climate Private Enterprise Survey in 2005 and the Business Environment and Enterprise Performance Survey in 2008/2013, it is con rmed that product innovation, foreign ownership, the use of foreign inputs, and having a better marketing strategy are associated with higher probability of exporting. Also, conditional on exporting, export sales increase with foreign ownership. The third chapter studies the import dependency of Turkish manufacturing exports in 2000s. By using TIVA database provided by OECD-WTO, it shows that compared to its peers (such as Czech Republic, Hungary) Turkish manufacturing exports depend less on imported intermediates. However, Turkey requires more intermediate imports than its peers in order to increase its exports relative to GDP. Using data from various sources (TIVA, Comtrade and TurkStat), the second part of the chapter provides a detailed analysis of import dependency in three key industries, namely the transport equipment, textiles and food. The results show that Turkey mostly specializes in production and exports of low value added and low-tech activities within these industries. To increase its exports and domestic value added embodied in exports, Turkey needs to move towards higher value added and technologically more advanced stages of production in the global value chain.