An investigation into the effects of agglomeration economies and firm formation on the labor market

This thesis contains three chapters, the first of which examines the economic history, firm dynamics, and labor market dynamics of Türkiye. This is a descriptive chapter that observes the facts of the firm and labor market dynamics, describing the progress Türkiye has made over the years and the current outlook of the market. In the second chapter, the relationship between unemployment and firm formation is examined on the NUTS-II and NUTS-III levels. In doing so, the results suggest that unemployment has a significant positive effect on new firm formation. The analysis concerning the converse relation, the impact of firm formation on unemployment, reveals no significant results at the NUTS-II level. However, a significant negative relationship is found at the city level with 4- and 5-year lags. The third chapter is an examination of agglomeration economies and their impact on wages in Türkiye using a micro dataset at the city level within Türkiye. Agglomeration economies are measured through specialization, diversity (Shannon's entropy), competition (Hirschman Herfindahl Index), and density (employment density). Through a rich employee employer matched dataset, it is found that two agglomeration externalities, namely density and diversity, have a positive effect on wages in Türkiye. However, these findings are similar to those found in some other developing countries, unlike those found in studies conducted on developed economies.