Rather than ponder sovereign wealth funds' (SWFs ') significance for global capital markets, this thesis takes a step back and asks the following: why do SWFs exist in such numbers across the global political economy? The SWF literature, dominated by fmancial economists and neoliberal commentators, has yet to adequately address this puzzle. This is significant given the funds embed systematically significant amounts of national wealth throughout speculative capital markets, thereby increasing their state's vulnerability to recurrent asset bubbles and crises. The thesis consequently examines the interest-based politics behind SWFs' domestic origins. It begins its analysis with the argument that SWFs are first and foremost domestic strategies of governance created to achieve specific short and medium term goals of the administrative state. This is despite their international and long-term investment orientations. In short, the funds serve to immediately stabilize state actors' governance function by reconceptualising problems of uncertainty in the quantitative and manageable terms of fmancial risk. This account of SWFs' origins thus contests that currently dominating mainstream commentary, which portrays the funds as evolutionary features of modem fmance capitalism. The domestic political interests SWFs were initially created to serve consequently remain critically unexamined. Drawing from the constructivist institutionalism literature, the thesis also seeks to demonstrate that SWFs are the institutional embodiment of a specific array of prescriptive fmancial ideas. It will be shown this framework offmancial 'knowledge' problematically constrains political actors to defer their interests to the demands of the speculative fmancial realm. In the face of recurrent crises, such constraint highlights how SWFs' immediate impact on domestic socioeconomic spheres outweighs their imagined fmancial benefits. The funds' rapid expansion since 2000 therefore poses significant implications for the nature and exercise of sovereign authority in SWF-states. These theoretical arguments are developed in Part I of the thesis, and then tested against three case studies in Part II: Norway's Government Pension Fund-Global; Alberta's Heritage Savings Trust Fund; and Ireland's National Pension Reserve Fund.

Although the number of researches measuring the efficiencies of higher education institutions has grown especially for the last two decades, literature of both parametric and non-parametric research on HEIs in Turkey is relatively scant compared to the countries alike. This PhD research that fills this noticeable gap in the literature scrutinises 53 public universities in Turkey between the full academic year of 2005-2006 and 2009-2010 covering 5-year time span. In this research, albeit the slight changes in the non-parametric estimation, number of undergraduate students, postgraduate students and research funding are taken as outputs, capital and labour expenses as input prices and eventually annual expenses as total cost. Moreover, university-based features are included into the model so as to apprehend potential heterogeneities among the universities. The initial conclusions coming out of parametric estimation have certain suggestions for public HEIs in Turkey. Firstly, mean efficiency performances of Turkish public universities are fairly dispersed ranging from 70% to 90%. This would encourage a new set of policy-making decisions to lead inefficient universities to be aware of the success of their counterparts. Secondly, despite the fact that some universities have relatively poor efficiency rates, in overall analysis their efficiency scores are indicating optimistic signs relying on certain models. Lastly, developing different models do matter for efficiency analysis in the sense that dispersion of efficiency values among Turkish universities does vary from one model to another.

This thesis studies the provision of public pension system through three different approaches. Part one focuses on demographic change and pension system reforms in China. It reviews the historical reforms and the problems and suggestions associated with the current system. More importantly, by applying a calibrated overlapping generations general equilibrium simulation model, it investigates the impact of the demographic changes and the choice of pension system to the individual choices and macroeconomic variables in the future. As with all social insurance programs, the provision a public pension system involves a trade-off between protection and distortion. The second part is a theoretical study about the optimal level of public pension system. It derives the optimal pension benefit level by considering the welfare loss imposed by the saving and labour supply distortion. The third part of the thesis, is an empirical study investigating the reasons for different choices in pension systems. There are three types of public pension systems popular throughout the world: Pay-As-You-Go (PAYG), Funded and Mixed. The latter two have grown up largely since 1980s, after Chile successfully built its Funded system. By applying logistic regression tests, we examine the likely social and economic variables which have been affecting the choices.

This thesis studies multi-sector macroeconomic models suitable for policy analysis. The first and second chapters use a variety of empirical and theoretical macroeconomic models allowing for the consumption of goods with different durability, and analyze which modeling assumptions and features of the economy are crucial for the conduct of monetary policy. The third chapter focuses on the role of fiscal and monetary policies in the Euro Area, thus providing insights about the joint policy stance that have the potential to inform future policy choices. In the fi rst chapter, we challenge a crucial assumption made in the literature of Dynamic Stochastic General Equilibrium (DSGE) models with durable and nondurable goods about their relative price stickiness. We start with a thorough empirical analysis by estimating a Structural Vector Autoregressive model of the US economy, in which we find that the response of the relative price of durables to a monetary policy contraction is either flat or mildly positive. It signi cantly falls only if narrowly de ned as the ratio between new-house and nondurables prices. These findings are then rationalized via the estimation of two-sector New-Keynesian (NK) models. Durables prices are estimated to be as sticky as those of nondurables, leading to a flat relative price response to a monetary policy shock. Conversely, house prices are estimated to be almost flexible. Such results survive several robustness checks and a three-sector extension of the NK model. These findings have implications for building NK models with durable and nondurable goods, and for the conduct of monetary policy. This chapter is based on an article co-authored with Dr. Giovanni Melina (International Monetary Fund) and published in the Journal of Economic Dynamics and Control. The second chapter adds imperfect labor mobility to a two-sector New- Keynesian model with durable and nondurable goods and estimates it with Bayesian methods. We use the model to design optimal monetary policy and find that an inverse relationship between sectoral labor mobility and the optimal weight the central bank should attach to durables inflation arises. Moreover, we show that the combination of nominal wage stickiness and limited labor mobility leads to a nonzero optimal weight for durables inflation even if durables prices were fully flexible. These results survive alternative calibrations and interest-rate rules and point toward a non-negligible role of sectoral labor mobility for the conduct of monetary policy. This chapter is co-authored with Dr. Giovanni Melina (International Monetary Fund). The third chapter of the thesis focuses on the role of shocks and policies in the Euro Area business cycle. We consider the long-term structure of government debt and introduce a financial sector. These features allow the model to account for both the recent nancial and sovereign debt crises, and the effects of the unconventional monetary policy implemented by the European Central Bank. We then determine the joint fi scal and monetary policy stance in the Euro Area and find that it has been expansionary in the aftermath of the financial crisis but has turned to be contractionary after the sovereign debt crisis. The joint effect of the austerity measures taken by governments of European countries and the zero-lower-bound constraint on the monetary policy rate caused the reversion of the policy stance, which was prevented to be even more contractionary only by the quantitative easing implemented by the European Central Bank. This chapter is based on a paper co-authored with Dr. Nicoletta Batini (International Monetary Fund), Dr. Giovanni Melina (International Monetary Fund) and Dr. Stefania Villa (Bank of Italy).

This thesis studies the promotion and financing of industrial diversification in natural resource-dependent countries. It tries to contribute to the existing literature by addressing three research questions in three main chapters. Chapter 2 attempts to answer the following question: Does financial development induce the diversification and complexity of exports in natural resource-dependent countries? Financial development and deregulation are standard recommendations in order to achieve greater industrial and economic development in these countries. However, using standard panel data econometrics, this chapter shows that financial development has no positive impact on export diversification or complexity. It argues that a general financial development policy recommendation is not expected to be a key for industrial and export diversification in these countries. This result provides an essential motivation for the following chapters. Chapter 3 looks at the financing of industrial diversification in two specific countries, namely Chile and Malaysia, which were both natural resource-dependent, but managed to successfully diversify their respective economies. The two countries have followed different strategies. In Chile, diversification has been towards niche natural resource-based industries, while in Malaysia the strategy has been to defy comparative advantages, resulting in specialization in sophisticated and high value added products. This chapter examines the role of the state and the financial system in financing the industrial diversification. The main finding is that in both countries the state has always played a key role in directing finance to strategic sectors and in contributing to the emergence of new industrial activities. Diversification in Chile and Malaysia has not occurred through free market operations and liberalized financial systems settings. Chapter 4 concentrates on promoting industrial diversification in oil dependent countries using Saudi Arabia as the case study. It starts by reviewing various strategies of economic diversification in the context of resource-dependent countries. In particular, it reviews the literature on resource-based industrialization (e.g. Perez, 2015), the literature on the Growth Identification and Facilitation Framework (i.e. Lin 2011) and the literature on the product space theory (i.e. Hidalgo and Hausmann 2009). This chapter, then, uses these frameworks to suggest possible diversification strategies in Saudi Arabia and to assess the government’s recently promoted diversification plan (Vision 2030). Furthermore, the potential role of the Saudi financial system is fully examined.

This thesis is composed of three core chapters on modern dynamic macroeconomics, which study different aspects of the public sector labor market in a large EU economy with significant public employment share and a non-trivial public sector wage premium over the private sector labor compensation. The study in this dissertation adds to earlier research by incorporating endogenous government hours and wages in the model framework and argues that the presence of a sizable public sector labor market in European economies generates significant interaction with the private sector labor and capital markets. In addition, the presence of interest groups (labor unions, government bureaucracy), as well as other labor market frictions in the public sector, is shown to be an important element of the analysis when discussing fiscal policy reforms. Motivated by the highly-unionized public sectors, the high public shares in total employment, and the public sector wage premia observed in most post-WWII European economies, Chapter 1 examines the role of public sector unions in a general equilibrium framework. A strong union presence in a large non-market sector is shown to be relevant for both business cycle fluctuations and for the welfare effect of fiscal regime changes. To this end, an otherwise standard real-business-cycle (RBC) model is augmented with a public sector union optimization problem. The resulting theoretical setup generates cyclical behavior in government hours and wages that is consistent with data behavior in an economy with a highly-unionized public sector, namely Germany during the period 1970-2007. The main findings of Chapter 1 are: (i) the model with a public sector union performs reasonably well vis-a-vis data; (ii) overall, the public sector union model is a significant improvement over a similar model with exogenous public sector employment; (iii) endogenously-determined public wage and hours add to the distortionary effect of contractionary tax reforms and produce significantly higher welfare losses. Additionally, the union model requires greater changes in tax rates to achieve a pre-specified increase in tax revenue compared to an equivalent model with exogenous public sector hours. Thus, endogenous public sector hours and wages in the setup are shown to be quantitatively important for public policy evaluation. Ignoring the positive co-movement between public and private hours and wages leads to a significant underestimation of the welfare effect of fiscal regime changes. Chapter 2 characterizes optimal fiscal policy and evaluates it relative to the exogenous (observed) one. Motivated by the high public employment, and the public wage premia observed in the major European economies, a Real-Business-Cycle model, calibrated to German data (1970-2007), is set up with a richer government spending side, and an endogenous private-public sector labor choice. To illustrate the effects of fiscal policy on sectoral allocation of hours, public wage rate determination and the provision of labor-intensive public services, two regimes are compared and contrasted to one another - exogenous vs. optimal (Ramsey) policy case. The main findings from the computational experiments performed in Chapter 2 are: (i) The optimal steady-state capital tax rate is zero, as it is the most distortionary tax to use; (ii) A higher labor tax rate is needed in the Ramsey case to compensate for the loss in capital tax revenue; (iii) Under the optimal policy regime, public sector employment is lower, but government employees receive higher wages; (iv) The benevolent Ramsey planner provides the optimal amount of the public good, and substitutes labor for capital in the input mix for public services and private output; (v) The government wage bill is smaller, while public investment is three times higher than in the exogenous policy case. Lastly, the thesis tries to delve into the hierarchical structure of public employment service and addresses the problem of rent-seeking in the public sector by government bureaucrats. Chapter 3 studies the wasteful effect of bureaucracy on the economy by addressing the link between rent-seeking behavior of government bureaucrats and the public sector wage bill, which is taken to represent the rent component. In particular, public officials are modeled as individuals competing for a larger share of those public funds. The theoretical model used is calibrated to German data for the period 1970-2007. The analysis then extends to the other major EU economies as well. To illustrate the effects of fiscal policy on rent-seeking, the exogenous and the optimal (Ramsey) policy cases are compared and contrasted to one another. The main findings of Chapter 3 are: (i) Due to the existence of a signicant public sector wage premium and the large public sector employment, a substantial amount of working time is spent rent-seeking, which in turn leads to significant losses measured in terms of aggregate output; (ii) The measures for the rent-seeking cost obtained from the model for the major EU countries are highly-correlated to indices of bureaucratic ineficiency; (iii) Under the optimal fiscal policy regime, steady-state rent-seeking is smaller relative to the exogenous policy case. The benevolent government invests more in public capital, sets a higher public wage premium, but chooses much lower public employment, thus achieving a decrease in rent-seeking.

This thesis discusses the choice of an exchange rate regime for a small commodity-exporting economy which experiences both monetary shocks and commodity price shocks. To investigate these matters, stochastic calculus is used in a continuous-time setting. The Franc Zone serves as an illustration: it is a currency union between a small country and a large country, and was subject to enormous strains in the last decade. The model developed in chapters 3 and 4 stresses the role of expectations in affecting domestic price variability, when the commodity price is described as a Poisson process. It also points to an exchange rate policy of "leaning with the wind" on the basis of the price stability criterion. Chapter 4 further investigates how the degree of openness of the small economy can influence the choice of the optimal exchange rate. Finally the analysis explains why the recent devaluation in the Franc Zone was a necessity in contrast to other studies which failed to notice the need for a devaluation. In this respect, it suggests a way to measure the degree of overvaluation.

This thesis contains four papers in the area of Public Economics. Chapter 1 looks at producers' taxation in a model of vertically related oligopolies. Both ad valorem and specific taxes are considered and formulae expressing their effects on prices and profits are derived, showing how these depend on factors such as demand conditions, technology and market structure. Conditions for taxation to cause price overshifting and to raise profits are given. Also, tax instruments are compared in terms of the amount of revenue collected and the effect on the price for the final good. Chapter 2 applies the results of the previous paper to the analysis of tax reforms. Vertically related oligopolies result in welfare loss for two reasons. Firstly, upstream oligopolists set the price of the intermediate good above marginal cost and this causes aggregate production inefficiency. Secondly, downstream oligopolists introduce an additional price-cost margin. The analysis focuses on tax reforms, where the government aims at reducing the welfare loss by levying taxes and subsidies on producers while raising no revenue. Chapter 3 focuses on the design of income tax enforcement policies in a principalagent framework. The existing literature assumes risk neutral taxpayers while this chapter considers the case of risk averse agents by assuming a kinked linear utility function. When individuals have the same attitude towards risk, it is shown that the optimal policy is such that income reports below a given threshold are audited at the probability level just sufficient to induce truthful reporting, whereas those above it are not audited. This makes the effective tax schedule to be quite regressive. Instead, if attitudes towards risk vary across taxpayers, the numerical results show that the optimal audit policy causes only a limited regressive bias, for income reports above the threshold meet a positive probability of audit. Chapter 4 examines the Presumptive Income Coefficients (PIC) audit policy, a scheme recently introduced in the Italian tax code and aimed at reducing tax evasion in the non-corporate sector. The tax agency applies the PIC to observable production costs to get an estimate of taxpayer's income, or presumptive income. The probability of audit is then dependent on the gap between presumptive and reported income. This issue is examined in a setting where the game between the taxing authority and taxpayers is modelled in a principal-agent framework.

Chapter 2, titled "Hotelling Tax Competition" shows how competition among governments for mobile firms can bring about excessive differentiation in levels of taxation and public good provision. Hotelling's Principle of Minimum Differentiation is applied in the context of tax competition and shown to be invalid. Instead, when an equilibrium exists, differentiation of public good provision is maximized. Non-existence of equilibrium, which is possible, is a metaphor for intense tax competition. The chapter also shows that, to some extent, perfect tax discrimination presents a solution to the existence problem created by Hotelling tax competition, but that the efficiency problem of Hotelling tax competition is exacerbated. Chapter 3 shows how the institutional rules imposed on its signatories by the GATT created a strategic incentive for countries to liberalize gradually. Ree trade can never be achieved when punishment for deviation from a trade agreement is limited to a 'withdrawal of equivalent concessions' , the most severe form of punishment allowed (Article XXVIII). Retaliation is not allowed to entail higher tariffs than those set by the initial deviant. If, in addition, tariff bindings (Article 11) limit an initial deviation from an agreement in a similar way, then efficient self-enforcing tariff reductions must proceed in a series of steps or 'rounds'. Chapter 4 provides an answer to the question "Why are trade agreements regional? " It argues that free trade agreements (FTAs) are regional because, in their absence, optimal tariffs are higher against (close) regional partners than (distant) countries outside the region. Optimal tariffs shift rents from foreign firms to domestic citizens. Lower transport costs imply higher rents and therefore higher tariffs. So regional FTAs have a higher payoff than non-regional FTAs. Therefore, only regional FTAs may yield positive gains when sponsoring an FTA is costly. To analyze equilibrium, standard theory of non-cooperative networks is extended to allow for asymmetric players. Naive best response dynamics show that 'trade blocks can be stepping blocks' for free trade.

The effect of public investment on economic growth is a popular topic in economic literature. Although there are endogenous growth models that incorporate public expenditure as a factor that promotes growth, findings in empirical literature provide conflicting results. This thesis contributes to this debate by providing a comprehensive analysis of the relationship between public investment and development by using a new panel dataset for Turkish provinces. For analyses, public investment is disaggregated as energy infrastructure, city infrastructure and security, education, health, transportation and communication, agriculture, mining, manufacturing, tourism and housing. The outcome variables are chosen as economic growth rate, the gross enrolment rate for primary and middle school, and the infant mortality rate. With regard to the econometric method, the fixed-effects technique is chosen. The dependent variables are calculated as the five-year forward moving averages of the outcome variables. Standard errors are corrected for serial correlation, cross-sectional dependence and heteroscedasticity. Findings in this thesis suggest that public investments in education, agriculture, tourism and energy infrastructure are associated with higher growth rates. There does not appear to be any statistical relationship between public city infrastructure and security investment and economic growth. However, public city infrastructure and security investment is related to the long-run gross enrolment rate positively, and the long-run infant mortality rate negatively. Additionally, public investment in energy infrastructure appears to have a negative relationship with the long-run infant mortality rate. Finally, results show that public investment in mining, transportation and communication are negatively related to the long run growth. The results provide partial support for the predictions of the model in Barro (1990) in the second chapter and the development literature in the third and the fourth chapters. Public policies in the sectors mentioned above arise as a factor that has an impact on the outcome of public investment. Post-estimation diagnostics and robustness analyses provide statistical evidence that support the findings.