The impact of human capital on the social security system of Turkey

Abstract

The purpose of the study is to analyze the impact of human capital, which is based on the years of education and working experience, on the duration of education, working and retirement which maximize the average lifetime utility by satisfying the constraints of the social security system in Turkey. In order to conduct the study, firstly, a general nonlinear optimization model that considers average education, working and retirement duration is constructed. After the determination of the human capital by conducting the regression analysis for determined datasets, the years of education, working and retirement period is determined within the PAYG pension plan structure of Turkey considering the current system parameters. Two models are constructed in the study. The first model examines the impact of human capital on the average income and decisions while the second model examines the impact of human capital by taking production in the economy into account. In other words, the optimization model is modified to measure only the impact of education and working experience and then the education and working experience impact with the economic growth concept. The models are run for different levels of social security and human capital parameters in order to examine the behaviors of the models due to the changes of these parameters. By the developed models in the study, the optimal duration of education, working and retirement, which maximize the average lifetime utility gained from the consumptions during working and retirement, are explained with the contribution of economic growth theory, which is based on human capital.