Economic Impact of External Income Through Labor Mobility on Economic Well-being in North Cyprus – CGE Model Approach

ABSTRACT: The objective of this thesis is twofold; first, to construct the first Computerized General Equilibrium (CGE) Model for the North Cyprus economy second, using the CGE model to explore the impact of external factor income in terms of remittances resulted from migration on the economic well-being in North Cyprus. The general equilibrium model is the first comprehensive model describing the economic activities in North Cyprus, and it is constructed as follows: Production process follows a 3-level nested CES function at the primary production level and Leontief structure at the intermediate level. Households demand commodities and services given that their utility is maximized; firms’ investment demand is determined endogenously through a Cobb-Douglas function, government sector spends the fixed proportion of their revenues on commodities, and the external trade is determined by the Constant Elasticity of Substitution (CES) import demand function with Armington assumption and Constant Elasticity of Transformation (CET) export supply function. Keywords: General Equilibrium Model, Factor Income from Abroad, Remittances, Labor Mobility, North Cyprus Economy.