A Cross-Sectional Analysis of Income, Consumption and Saving Behavior of Turkish Household

Abstract

A cross-sectional analysis of income, consumption and saving behavior of Turkish household This paper investigates the age profiles of income, consumption and saving of Turkish households, compares them to the profiles reported for various developing and developed countries, and evaluates the results within a life-cycle theory framework. These life-cycle profiles are constructed for separate income quartiles and education groups as well as for the whole population. It is crucial to understand the consumption and saving behavior of different income groups in Turkey due to the high level of income inequality. As current income could be affected by temporary income shocks, we use educational attainment level as an instrument for permanent income in analyzing the relationship between income and consumption/saving. Furthermore, the age profiles presented in this study provide us information as to how savings may evolve in the future as a result of changing demographic conditions. In the second part of the study, cross-section profiles of income, consumption, and saving from 2002 to 2006 are compared to see how these profiles have evolved over time.