Saving, public social security and life-cycle theory: New evidence from an emerging country (Turkey)

This study analyzes the relationship between saving and public social security for an emerging country, Turkey, that has one of the most generous social security systems in the OECD region. This study is the first of its kind for Turkey, in fact, for any emerging country in the world in both time-series and cross-section settings. Another significance of this study is that it constructs the social security wealth series (SSW) for the period between 1970 and 2003, which are needed in the time-series investigation. These series, calculated for the first time for Turkey, show that social security wealth is the biggest part of household wealth and should not be omitted in empirical studies analyzing households' consumption and saving behaviors in Turkey. The time-series study proves that the social security wealth has robust and positive effects on the aggregate consumption, and therefore it suppresses the national saving around 25%. This result is also confirmed by the cross-section analysis, which uses the Household Labor Force Survey conducted in 2002 for more than eight thousand households.