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Social Security, Intergenerational Transfers, and Saving: New Evidence from an Emerging Country

Yigit Aydede ()

No 2007-WP-16, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: Because of the several shortcomings of aggregate time-series investigations, cross-section studies outnumber the time-series analyses on the relationship between saving and Social Security. This study is the first of its kind for an emerging country that examines the subject at two major points: (1) by using aggregate social security wealth simulations, it formally shows that the PAYG system in Turkey constitutes significant wealth redistributions of resources among different age cohorts; (2) instead of applying traditional wealth functions to observe whether social security wealth displaces non-pension wealth in cross-section setting, it investigates whether or not households’ consumption behavior exhibits a life-cycle pattern by using the Household Labor Force Survey conducted in 2002 for more than eight thousand households. The results confirm that marginal propensity to consume (MPC) out of total resources is significantly different for different age cohorts. Because of its strong Ponzi scheme structure and the fact that it involves resource transfers between different age cohorts we conclude that the Turkish PAYG system may suppress the national saving in Turkey.

Keywords: Social Security; Wealth; Intergenerational Transfers; Life-Cycle Saving (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-04, Revised 2007-07
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