Assessing the Effect of Subsidizing Private Pension Participation on Aggregate Savings and Other Macroeconomic Outcomes: Theory and Evidence from Turkey

The aim of this study is to investigate the impact of social security reform in Turkey, which provides a government contribution to the private pension payments, on savings of the households. An overlapping generations model is developed to capture the main features of the social security system in Turkey. Using this model, the study evaluates the impact of this reform on various economic outcomes, including household savings, consumption, labor supply and welfare over the life‐cycle. Micro level data is used to calibrate and estimate the parameters of the model. Alternative policy options are evaluated using simulation exercises.