Finished Work         

Erus, B. and O. Hatipoglu (2017) “Physician Payment Schemes and Physician Productivity: Analysis of Turkish Healthcare Reforms” (forthcoming in Health Policy) (download an early working paper version)

Following healthcare reforms in Turkey, inpatient and outpatient care provided in public hospitals more than doubled from 2003 to 2006. An important component of the reforms has been a shift from a salary based physician compensation scheme to one where fee-for-service component is dominant. The change did not only incentivize physicians to provide a higher volume of services but also encouraged them to practice full-time, rather than dual-time, in public hospitals. Lacking figures on full-time equivalent figures at hospital level, earlier research used head-counts for physician workforce and found technological change and scale economies to be important determinants. We employ data envelopment analysis and find that, under plausible scenarios regarding the number of dual vs full-time physician numbers, most of the change in hospital services may be explained only by the shift to full-time practice. Our estimations find the change in technology and scale economies to play a relatively minor role.  

Hatipoglu, O. (2016) Informal Sector: A History of Definitions, Theories, and Linkages"  in Encyclopedia of Law and Economics, Marciano, Alain, Giovanni Battista (Editor-in-Chief), Springer, Berlin-New York.  (link for the encyclopedia)

I review and discuss definitions of informal sector introduced by social scientists over the last half century. I describe how informal institutions, informal markets, and their participants' activities form together the informal sector. I provide insight into the difficulties in defining informal sector from a judicial point of view. I discuss causes and consequences as well as economic costs and benefits of the informal sector. Finally, I provide a brief analysis of existing econometric methods in measuring its size.

Hatipoglu, O. and A.E. Akyuz  (2015)"Helping the Poor with Selfish Intentions: Trade, Foreign Aid and Growth" 

Departing from explanations that involve either altruistic or political motivations of donors, this study links a donor's willingness to give aid to economic incentives and returns. Since aid increases the returns from trade and FDI linkages for donors, there exists a non-altruistic basis for helping poor countries. We explore this idea by developing a two-country dynamic Stackelberg model of foreign aid and trade and endogenize aid-tying process by incorporating it into the donor's optimization problem. We analyze how different components of foreign aid, such as education, investment, commodity and general budget support are optimally supplied over time. 

Yuksel, E., Ozcan, K.M. and Hatipoglu, O. (2013) "A Survey on Time Varying Parameter Taylor Rule: A Model Modified with Interest Rate Pass Through"  Economic Systems, vol 37(1), 122-134. (download the working paper version)

Abstract: This paper provides a broad survey of the literature on Taylor-type monetary policy rules with time-varying parameter (TVP) specification. We claim that some modification should be made in the monetary transmission mechanism of Taylor- type monetary policy models to account for altering risk preference of individuals. In line with this approach, we introduce an interest rate pass through specification of the monetary transmission process in a general equilibrium model to account for different perceptions of risk by individuals. We estimate the time variable parameters of the model by employing a structural extended Kalman Filter (EKF).

Hatipoglu O. and S. Sadikoglu (2013) No Brain Gain Without Brain Drain? Dynamics of Return Migration and Human Capital Formation under Asymmetric Information (download the working paper)

We study migration and return migration decisions of skilled workers, along with the impact of migration prospects on human capital formation in the source country under asymmetric information. In addition, we analyze the dynamics of migration and return migration as informational asymmetries and migration costs evolve over time as a result of migration networks. We find that skilled migration is followed by return migration which involves both positive and negative selection of skilled migrants. Furthermore, we show that the possibility of return migration under asymmetric information mitigates the brain draining effect of initial migration prospect and has a positive impact on human capital formation in the source country. Finally, we derive the conditions under which the possibility of migration leads to welfare gain in the source country.

Hatipoglu, O. (2012) "The Relationship between Inequality and Innovative Activity: A Schumpeterian Theory and Evidence from Cross-Country Data", Scottish Journal of Political Economy, vol. 59(2), 224-248. (download the working paper version) 

Abstract: This article examines the effect of inequality on technological progress when innovations are protected by patents of finite length. It provides a Schumpeterian theory of the non-linear relationship between income distribution and innovative activity in a dynamic general equilibrium setting. Additionally, the theory is empirically tested by investigating how inequality affects innovative activities in a cross-country setting. Using two new data sets on inequality, one linear and two non-linear dynamic panel data models are estimated. The results are robust to two common inequality measures. They support the hypothesis that there is an overall negative relationship between inequality and innovative activity and the relationship is non-linear but not necessarily an inverted-U.

Hatipoglu, O. and Uyar, O. (2012) "Estimating Financial Bubbles in Emerging Markets" Emerging Markets Finance and Trade (2012), vol. 48(5), 64-75.  (download the working paper version )

Abstract: High correlation of stock price indices among a relatively large number of developed and emerging markets indicates that bubbles might spill over from one country to another. To test for such spill-over effects we estimate the bubble component of price changes using a non-linear structural  state space model with time-variable parameters. We apply directionality tests to bubbles  formed in USA and Turkey. We find that bubbles originating in USA lead to bubbles in Turkey.  We provide empirical evidence on bubbles formed during major financial crises of the last two decades in  Turkey and the last century in US. Despite the improvement in fundamentals and overall economic  performance, we find Turkish asset market is still subject to volatile financial bubbles  that might stem from abroad.

Hatipoglu, O. and Ozbek, G. (2011) "On the Political Economy of the Informal Sector and Income Redistribution", European Journal of Law and Economics,  vol. 32(1), 69-87 (with G. Ozbek) (download the working paper)

Abstract: In this paper we develop and simulate a political economy model to produce qualitative results to illustrate the differences between economies with different distributional features. We analyze a general equilibrium model in which agents choose to be employed in formal or in the informal sector given their productivity levels. The formal sector is then taxed to provide income subsidies and the level of redistribution is determined endogenously through majority voting. The model accounts for the different sizes of informal sector and income redistribution in Turkey, Mexico and United States.


Alper, E. , Ardic, P. and Hatipoglu, O. (2010) "Structural Change and Economic Growth: a Calibration Exercise for Turkey",  Economics Bulletin, vol. 30(2), 983-995. (with C. E. Alper and O. P. Ardic) (download the working paper)

Abstract: Using data for the years 1972 -2006, we calibrate the dynamic general equilibrium model of structural change by Kongsamut et al. (2001) to Turkey. We then predict the shares of output and employment for the agricultural, manufacturing, and services sectors along the balanced growth path for Turkey until 2050. Similar to the past experience of the developed economies, we observe a declining share of agriculture in both employment and output. However, the rate of decline is much slower and based on the model, we predict the agricultural sector will still have a 10% share of output and employment by 2050 in Turkey.

Hatipoglu, O. and Alper, E. (2009) "Estimating Central Bank Behavior in Small Open Economies" in Central Banking in Middle East and North Africa , ed. David Cobham and Ghassan Dibeh , Routledge, New York, USA, 210-226. (download the paper)

Abstract: An inflation targeting regime generally entails abolishing exchange rate targets in favor of monetary targets. It is not clear, however , why the central banks in emerging markets with inflation targeting regimes should not care about exchange rate movements given the vulnerability of their economies to such fluctuations. In this paper, we develop and estimate an augmented Taylor rule for the Turkish economy in which the central bank responds not only to output gap and inflation gap but also to an exchange rate gap. We employ a dual extended Kalman filter technique to estimate time varying parameters and unobserved variables, such as exchange rate target and potential output, simultaneously. This technique allows us to trace any changes in central bank behavior including regime shifts after the switch. We find positively significant coefficients for output gap and inflation gap in accordance with a Taylor rule. We also find that Central Bank of Turkey has given relatively more importance to the inflation gap than output gap or the exchange rate gap in determining interest rates.

Alper, E. and Hatipoglu, O. (2009) "The Conduct of Monetary Policy in Turkey in the Pre- and Post-crisis Period of 2001 in Comparative Perspective: a Case for Central Bank Independence" in Turkey and the Global Economy: Neoliberal Restructuring and Integration in the Post-Crisis Era, ed. Fikret Senses and Ziya Onis, Routledge, Oxon, England,  50-72 . (download the paper)

Abstract: We document the role of independence for Central Bank of Republic of Turkey (CBRT) as it matters to successful implementation of monetary policy. We compare the implementation of monetary policy pre- and post-crisis periods within an empirical framework which allows us to measure the role of independence quantitatively. We estimate a Taylor rule with time varying coefficients by employing a dual extended Kalman filter. We find that the coefficient of inflation gap has increased substantially since CBRT gained de-juro independence.

Erus, B. And Hatipoglu, O. (2010) "Effects of Performance Based Systems on the Efficiency of Health Services" II. International Congress on Performance and Quality in Health Services Conference Proceedings, vol. 2, 316-324. 

Abstract: Starting in 2004 hospitals operated by the Ministry of Health of Turkey switched to a Performance Based Supplementary Payment System (PBPS) to compensate health professionals. Under the new regulation physicians working in public hospitals are paid according to the number of patients they take care of and the effort the operations require. At the same time a new law is introduced prohibiting  part-time work by physicians in state hospitals as well as bringing stringent measures on opening new private practices. Using a large panel data set on Turkish hospitals, this study investigates the impact of PBPS on efficiency in healthcare services by controllling the full time vs. part time choices of physicians working in public sector and impact of demand side reforms as well as demographic characteristics. 

"Inequality and Growth : A Demand Perspective" ISS Working Paper , ISS/EC 2007-08 (download the working paper)

Abstract: This paper builds a demand based theory of inequality and growth in a Schumpeterian setting which accounts for the non-linear relation between them. Inequality affects growth through demand patterns for new products when people have hierarchic preferences. In a society where assets are highly concentrated, a redistribution increases growth if it also increases the total demand for innovators. One such case is a redistributional scheme which makes poor just rich enough to afford the innovators product-maybe now maybe in the nearer future- without making the rich poor enough so that it forgoes consumption of the innovators product today. This case is most likely to occur when inequality is already high. On the other hand, if the rich becomes just poor enough so that the demand for innovators product falls, reducing inequality further hurts growth. I provide a model where resources are necessarily wasted when the composition of aggregate demand shifts away from innovation. I study the link between patent length and growth at different levels of inequality. A reduction of patent length causes an indivisibility in efficient redistributive policies.

"An Empirical Analysis of the Relationship between Inequality and Innovation in a Schumpeterian Framework", ISS Working Paper ,ISS/EC 2007-10 (download the working paper)

Abstract: I empirically investigate the non-linear relationship between inequality and innovation in a Schumpeterian setup where growth is expressed by the rate of innovations. In this framework inequality plays a role in determining the market sizes for innovators and therefore is a major determinant of growth. By using two new data sets of inequality and several panel data techniques including non-parametric methods, I find support for an inverted U-shape between inequality and innovative activities. The results are robust to inequality definitions and estimation techniques.

"Inequality and Growth : Where Are We Heading. A Survey of Recent Findings " ISS Working Paper, ISS/EC 2007-07 (download the working paper)

Abstract: This paper surveys the evolution of the Kuznet's hypothesis and the recent findings of the inequality and growth literature. I find that, although the negative relation between inequality and growth is now well established in theoretical literature, there are discrepancies in the recent empirical findings. Even though some of these discrepancies can be attributed to data and estimation problems, the main problem remains a lack of theory of inequality and growth which can account for all the empirical discrepancies. A possible solution is suggested which emphasizes the role of demand patterns created by inequality.

"Complementary Shifts of Technology and Economic Development" ISS Working Paper, ISS/EC 2007-09(download the working paper

Abstract: I show how multiple equilibria or development traps occur in a two sector partial equilibrium model given an externality among intermediate inputs. The final goods sector achieves a higher productivity by adopting more roundabout ways of production. The growing demand by the final goods sector, in turn, induces more and more firms to enter the intermediate goods sector facilitating a wider range of production services to become available. This leads to a circularity or a self-fulfilling mechanism that triggers the economy to take off. The positive externality that arises because of the interaction between the sectors is the key to my model. Although the complementarity of newly arrived technologies effect the degree of the externality the equlibrium path of the economy is determined only by the initial degree of the intermediate input variety.

"Optimal Taxation in a Finite Horizon Model: Are Lump-Sum Taxes a Better Solution?" NYU Working Paper,1999 (download the working paper)

Abstract: I develop a finite horizon model characterizing the dynamic behavior of an economy where agents face a probability of death each period. The main problem with finite horizon models is to derive the aggregates of the economy without making assumptions about the population and age structure. I solve this problem using a methodology similar to Blanchard(1985). I show when agents are faced with life uncertainty lump-sum taxes are welfare enhancing compared to distortionary taxes.

© Ozan Hatipoglu 2015