Abstract
The Turkish public pension system is the most generous pay-as-you-go (PAYG) system in the OECD region, yet totally insolvent. The present paper is the first systematic investigation to measure this unsustainable generosity by calculating the aggregate Social Security wealth (SSW) series. The main objective of Social Security is to insure seniors against an uncertain life span. However, as PAYG systems around the world face increasing financial challenges due to aging populations and the probability of being a net loser rises for coming generations, the ability to obtain this objective is being questioned with growing public confusion: How does Social Security affect lifetime wealth? How does one calculate the financial terms of Social Security for households in different generations? Our simulations cover 1970 to 2003, and the results show that the SSW is the biggest part of household wealth in Turkey with declining implicit rates of return for different age cohorts, implying a significant unfairness among generations.
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