38. **Unequal access to financial services among different groups is a more important problem than the level of financial intermediation per se** . There is a huge gender gap in access to banking accounts in favor of men. In particular, 82 percent of men older than 15 have access to financial accounts, compared to only 33 percent of women (figure 4.2). The gap also exists across groups with different level of income. Among the top 60 percent of the population, 63 percent have access to financial accounts in formal institutions, compared to only 51 percent among the bottom 40 percent (figure 4.3). Financial inclusion is thus an important policy agenda to sustain shared prosperity going forward.

39. **Further poverty reduction in Turkey will depend tremendously not only on intragenerational class mobility, but also on intergenerational mobility.** Hentschel et al. (2010) demonstrated that intergenerational transmission of inequity is powerfully affecting Turkey’s youngest generation today. The authors show that circumstances, or factors any single person can do nothing about, are very important in determining life chances in Turkey. In particular, factors such as one’s area of birth and parental education explain two-thirds of the inequality of opportunity related to the wealth distribution in the country. The socioeconomic background of families is an important factor driving inequality of opportunities in education as well. While Turkey has been making progress in reducing the importance of socio-economic background for education outcomes (see OECD, 2013), it still ranks among the countries in the OECD with the largest effect of these factors on individual achievement. Early childhood education and measures to improve the quality of education particularly in schools in disadvantaged regions and districts are important to sustain and accelerate recent improvements.

40. **Turkey will continue to benefit from demographic dividends, but after 2025 the situation will change dramatically.** As shown in figure A.9 in annex, Turkey has been benefiting from demographic window of opportunity since the 1980s. The share of children and elderly was declining, while the share of working age population was increasing and will be highest in the 2020s. However, once the window closes, Turkey will face the challenge of aging. While the elderly are not among those most likely to be affected by poverty (children are more at risk) and pensions in fact contribute significantly to income growth in the bottom 40 percent, the pension system is projected to continue to run significant deficits given a low effective retirement age and relatively generous replacement rates. Rising health care costs will add to the fiscal burden of aging. Encouraging longer working lives will be important to manage these costs as well as ensure resources can be concentrated on reducing vulnerability in old age.

41. Summing up, Turkey had a remarkable performance in reducing poverty and boosting shared prosperity. As a result, there was a strong upward intra-generational mobility expanding the size of the middle class in the country. The main drivers of these positive changes were coming from the labor market, social assistance and pensions. Nevertheless, continuing the same path will require addressing several challenges including: (i) improving access to markets with a focus on reducing gender and rural/urban gaps, (ii) increasing female labor force participation, and (iii) reducing intergenerational inequality by weakening the link between circumstances people cannot be held accountable for and socioeconomic outcomes.

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