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Benefit-Cost Analysis of Turkish Social Insurance Institute Gradual Privatization Proposal

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  • Gumus, Erdal

Abstract

There has been consideration of alternative social security financing methods throughout the world during the last two decades. One alternative adopted in several countries is the privatization of so-called pay-as-you-go financing systems. The purpose of this study is to estimate social benefits and social costs associated with a Feldsteinian-type gradual privatization of the Turkish Social Insurance Institute, SSK. Based heavily upon data provided by the International Labor Organization, financial projections of the institution were made and extended to apply benefit-cost models of privatization. Present values of the change in net social benefit were estimated. The effect of privatization on representative individuals has been quantified. Sensitivity analyses were conducted to determine the robustness of the estimates. Benefit-cost results indicate that social benefits associated with a privatization alternative exceed the social costs even after adjustments for changes in key parameters that reduce social net benefits. However, privatization affects current representative individuals so negatively that it may constitute a good political reason to be against, rather than in favor of, choosing privatization.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42372.

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Date of creation: 2005
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Publication status: Published in Journal of Economic Cooperation 4.26(2005): pp. 87-126
Handle: RePEc:pra:mprapa:42372

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Keywords: social security; privatization; benefit-cost analysis; Social Insurance Institute; SSK;

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  1. Olivia S. Mitchell & Stephen P. Zeldes, 1996. "Social Security Privatization: A Structure for Analysis," NBER Working Papers 5512, National Bureau of Economic Research, Inc.
  2. Martin Feldstein, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," NBER Working Papers 5413, National Bureau of Economic Research, Inc.
  3. Olivia S. Mitchell, 1996. "Administrative Costs in Public and Private Retirement Systems," NBER Working Papers 5734, National Bureau of Economic Research, Inc.
  4. Metin Ercen & Deniz Gokce, 1998. "Defined Contribution Model: Definition, Theory and an Application for Turkey," Istanbul Stock Exchange Review, Research and Business Development Department, Borsa Istanbul, Research and Business Development Department, Borsa Istanbul, vol. 2(8-7), pages 33-51.
  5. Martin Feldstein, 1999. "Tax Avoidance And The Deadweight Loss Of The Income Tax," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 674-680, November.
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  7. von Furstenberg, George M, 1980. "Private Saving," American Economic Review, American Economic Association, American Economic Association, vol. 70(2), pages 177-81, May.
  8. Ahmet Tuncay Teksoz & Serdar Sayan, 2002. "Simulation of Benefits and Risks after the Planned Privatization of the Pension System in Turkey: Is the Expected Boost to Financial Markets Feasible?," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 38(5), pages 23-45, October.
  9. Kenc, Turalay & Sayan, Serdar, 2001. "Demographic shock transmission from large to small countries: An overlapping generations CGE analysis," Journal of Policy Modeling, Elsevier, Elsevier, vol. 23(6), pages 677-702, August.
  10. Serdar Sayan & Turalay Kenc, 1999. "Long-term Consequences of Rehabilitating a Financially Troubled Pension System: An Analysis for Turkey," Working Papers, Economic Research Forum 9914, Economic Research Forum, revised May 1999.
  11. Serdar Sayan & Arzdar Kiraci, 2001. "Identification of parametric policy options for rehabilitating a pay-as-you-go based pension system: an optimization analysis for Turkey," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 8(2), pages 89-93.
  12. Attanasio, Orazio P. & Paiella, Monica, 2001. "Households savings in the U.S.A," Research in Economics, Elsevier, Elsevier, vol. 55(1), pages 109-132, March.
  13. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  14. Sayan, Serdar & Kiraci, Arzdar, 2001. "Parametric pension reform with higher retirement ages: A computational investigation of alternatives for a pay-as-you-go-based pension system," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 25(6-7), pages 951-966, June.
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