Saving and Social Security Wealth: A Case of Turkey

This paper is the first attempt in the literature to investigate the effects of public social security on aggregate consumption in a time-series setting for a developing country, Turkey that has one of the most generous social security systems in the OECD region. In order to quantify the social security variable, the paper uses the social security wealth (SSW) series calculated for the first time for Turkey and shows that SSW is the largest part of the household wealth in Turkey and therefore should not be ignored in the aggregate consumption studies. After having all sensitivity tests for the major assumptions embedded in the SSW series, it shows that SSW has robust and positive effects on aggregate consumption, and therefore the PAYG system suppresses the Turkish national saving approximately 25% in 2003.