CitationCerito lu, Evren (2009). The empirical importance of precautionary saving in Turkey. Master's thesis / Doctoral dissertation.
AbstractThe aim of this Ph.D. thesis is to contribute to the understanding of household consumption and saving behaviour under risk and uncertainty. The precautionary saving hypothesis proposes that households will postpone their consumption and increase their saving level to be protected against future labour income uncertainty. It is reasonable to interpret the additional rise in household saving due to future labour income uncertainty as precautionary saving. Moreover, it is expected that households will prefer to keep their precautionary saving in the form of financial assets because of their liquidity.
I utilize several waves of household budget surveys, which are designed as repeated cross-sectional surveys that provide information about social, economic and demographic characteristics of households to reveal the empirical importance of precautionary saving in the Turkish economy. The empirical analysis confirms the predictions of the precautionary saving hypothesis. It is observed that households raise their saving level under risk and uncertainty and the amount of precautionary saving constitutes a significant fraction of total household saving. Labour income risk is the most important source of concern for households among the analysed risk types, since a job-opportunity in the registered economy creates a reliable source of income and social security coverage. Moreover, households implement alternative strategies in addition to precautionary saving such as holding a second job and to increase the number income earners in the family.
The influence of risk and uncertainty on household consumption and saving behaviour is further intensified by the lack of a sufficient social security system, which meets the needs and the demands of society. However, a comprehensive social security reform starting with the introduction of universal health care is being implemented in Turkey. Thus, it is thought that the improvement of the social security system will diminish the significance of the precautionary motive for saving for households.