Benefit-Cost Analysis of Turkish Social Security Reform Proposals
Posted: 28 Oct 2003
Date Written: 2001
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 three Turkish social security institutions. Based heavily upon data provided by the International Labor Organization, financial projections of the three institutions were made and extended to apply benefit-cost models of privatization. Present values of the change in net social benefit for each institution were estimated. The effect of privatization on representative individuals has been quantified for each institution. Sensitivity analyses were conducted to determine the robustness of the estimates. Benefit-cost results indicate that social benefits associated with a privatization alternative for each of the three Turkish social security institutions 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.
Keywords: Social Security, reform, Turkish Social Security, Benefit-cost analysis
JEL Classification: H55
Suggested Citation: Suggested Citation