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Defined Contribution Model: Definition, Theory and an Application for Turkey

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  • Metin Ercen
  • Deniz Gokce

Abstract

Based on a numerical application that employs social and economic parameters of the Turkish economy, this study attempts to demonstrate that the current collapse in the Turkish social security system is not unavoidable. The present social security system in Turkey is based on the defined benefit model of pension provision. On the other hand, recent proposals for reform in the social security system are based on a multipillar system, where one of the alternatives is a defined contribution pension scheme. Utilizing a defined contribution model and Turkish parameters, this study reaches the following findings: first, based on Turkish parameters, the level of retirement pension is very sensitive to the retirement age. Second, the pension rates to be paid to retirees are very sensitive to the real rate of returns realized by pension fund investments. And finally, under a defined contribution model, where current parameters of the Turkish economy are used, reasonable levels of pension are found to be with n reach.

Suggested Citation

  • 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, vol. 2(8-7), pages 33-51.
    • Handle: RePEc:bor:iserev:v:3:y:1998:i:8-7:p:33-51
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    Cited by:

    1. Gumus, Erdal, 2005. "Benefit-Cost Analysis of Reforming the Turkish Social Insurance Institution for the Self-Employed (Bağ-Kur)," MPRA Paper 42108, University Library of Munich, Germany.
    2. Gumus, Erdal, 2005. "Benefit-Cost Analysis of Turkish Social Insurance Institute Gradual Privatization Proposal," MPRA Paper 42372, University Library of Munich, Germany.
    3. Gumus, Erdal, 2008. "Türk Sosyal Güvenlik Sisteminin Değerlendirilmesi ve Sosyal Güvenlik Kurumlarının Finansal Geleceği [An Evaluation of Turkish Social Security Reform Process and Its Financial Future]," MPRA Paper 42160, University Library of Munich, Germany.

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