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Income and, consumption and saving behavior of Turkish households

Cilasun, Seyit Mümin
Using 2002-2006 Household Budget Survey, this thesis investigates the income, consumption and saving dynamics of Turkish households within a life-cycle theory framework by employing cross-sectional analyses and cohort techniques. Cohort techniques are used not only to analyze these variables, but also to investigate the demographics and components of income and consumption. The analyses are deepened by dividing the sample according to the location of the households (urban-rural areas), and significant differences are found between urban and rural households, especially in terms of saving behaviors. Income, consumption and savings of formal and informal households are also investigated. Analyzing these households provides information regarding the precautionary saving since the higher income uncertainty of the informal households is expected to force them for extra saving due to precautionary motive. Finally, the life-cycle model and the precautionary saving hypothesis are tested by estimating log-linearized Euler equations. In the test of precautionary saving hypothesis, formal-informal data are used as a proxy for the risk variable. According to the estimation results, the predictions of the life-cycle model do not hold for Turkey but there is no evidence that this is due to precautionary saving.