Abstract for: Financial Sustainability of Social Security Institutions in the Presence of Aging Populations

The purpose of this study is to build an experimental platform for scenario and policy analyses of social security institutions that deploy pay-as-you-go schemes as the financing method. To realize this aim, system dynamics methodology is utilized and a generic dynamic simulation model is constructed. Afterwards, the financial sustainability of the social security institution in Turkey, as a susceptible country for its aging population, is investigated via scenario and policy analyses. The results show that (i) irrespective of scenarios and policies, aging phenomenon is quite dominant and a serious threat to financial sustainability, (ii) informal sector plays a crucial role in the financial sustainability of social security systems, and (iii) a hybrid policy combining increase in retirement age, premiums and decrease in informal sector ratio seems to be the most promising one among the other policies. Future research involves modeling the fully funded scheme complementing this study to enable the public policy makers to compare and contrast the two financing methods comprehensively.