Structural Determinants of Household Savings in Turkey : 2003-2008

Abstract

Widening current account deficits coupled with low private saving rates in Turkey have started a recent policy debate on how household savings can be increased. Using Household Budget Surveys from 2003 to 2008, we study the structural determinants of household savings in Turkey. We consider various different definitions for savings, including durable consumption goods, education and health. Our findings are robust across different definitions. The results indicate that dependency ratios of households are important determinants of savings. Lower shares of dependent children or dependent elderly in the household imply higher saving rates. Moreover, female labor force participation has significant effects, i.e. households with higher shares of working females, have higher saving rates as well. We also find that households in which the head is self-employed or an employer have higher saving rates. Moreover, households with where pension payments constitute a larger share of income save less. Note that pension payments are always coupled with free health benefits. These findings point to strong evidence of precautionary savings.

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