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Releasing Latent Demand: Wage Shocks and Matched Pension Contributions among Low Earners

Author

Listed:
  • Abdullah Tirgil

    (Department of Economics, Ankara Yildirim Beyazit University)

  • Sadettin Haluk Citci

    (Department of Economics, Gebze Technical University)

  • Halit Yanikkaya

    (Department of Economics, Gebze Technical University)

Abstract

Matching subsidies for retirement savings consistently fail to draw contributions from workers at the lower end of the wage distribution. The literature is divided on whether the cause is preferences or constraints. Using administrative records on 2.7 million individual-year observations in the voluntary Turkish Individual Pension System, we exploit the 2016 minimum wage shock, which raised the wage floor by 30 percent while leaving the 25 percent state match unchanged. Workers in the affected wage brackets raised real annual pension contributions by 3.9 to 5.7 percent, with a within-participant intensive-margin response of 2.6 to 4.1 percent on a balanced panel. The contribution response is larger for workers without a university degree than for graduates, at 6.8 percent versus 1.7 percent. The pattern is consistent with a binding budget constraint at the bottom of the wage distribution that the matching subsidy on its own cannot relax.

Suggested Citation

  • Abdullah Tirgil & Sadettin Haluk Citci & Halit Yanikkaya, 2026. "Releasing Latent Demand: Wage Shocks and Matched Pension Contributions among Low Earners," Working Papers 2026-02, Gebze Technical University, Department of Economics.
    • Handle: RePEc:geb:wpaper:2026-02
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    File URL: https://www.gtu.edu.tr/fileman/Files/UserFiles/isletme_fakultesi_dekanligi/econwp/gtuwp-2026-02.pdf
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    Keywords

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    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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