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Intergenerational Implications of Fiscal Consolidation in Japan

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  • Kiichi Tokuoka

Abstract

In Japan, intergenerational inequality in lifetime resources is substantial, with a heavier fiscal burden on the young than the old. Moreover, given the need for fiscal consolidation, the inequality is even worse than existing policy would suggest. However, this does not mean that fiscal consolidation would make the young worse off. Lack of fiscal consolidation would eventually increase interest rates, which would reduce output and hit young generations harder. Simulations using an overlapping generations model indicate that, from the perspective of intergenerational fairness, it would be desirable to include both social security spending reforms and revenue measures in a fiscal consolidation package. The simulations also show that delaying fiscal consolidation could be costly and worsen intergenerational resource inequality.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/197.

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Length: 25
Date of creation: 01 Aug 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/197

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Keywords: Fiscal consolidation; Aging; Economic models; Fiscal reforms; Government expenditures; Revenue measures; pension; pension benefits; public pension; pension contribution; contribution rate; pension system; basic pension; retirement; tax rate; public pension system; pension reform; pension contributions; intergenerational fairness; lower pension; current pensioners; pensioners; pensions; fiscal adjustment; distortionary impact; public pension reform; pension benefit; private pension; future pensions; pension spending; primary deficit; tax rates; contribution period; public finances; defined-benefit pension; fiscal policy; national accounts; intergenerational transfers; fiscal burden; aging population; benefit pension; pension programmes; current pension; social security spending; pension expenditure; public debt; private savings; labor input; structural fiscal; retirement-income; pension reforms; pension cut; public pension reforms; health care;

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References

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  1. Kazumasa, Oguro & Junichiro, Takahata & Manabu, Shimasawa, 2009. "Child Benefit and Fiscal Burden: OLG Model with Endogenous Fertility," MPRA Paper 16132, University Library of Munich, Germany.
  2. Hamaaki, Junya & Hori, Masahiro & Murata, Keiko, 2012. "Intergenerational Transfers and Asset Inequality in Japan: Empirical Evidence from New Survey Data," CIS Discussion paper series 544, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  3. Laurence J. Kotlikoff, 1998. "The A-K Model: It's Past, Present, and Future," NBER Working Papers 6684, National Bureau of Economic Research, Inc.
  4. Jonathan Gruber & Kevin Milligan & David A. Wise, 2009. "Social Security Programs and Retirement Around the World: The Relationship to Youth Employment, Introduction and Summary," NBER Working Papers 14647, National Bureau of Economic Research, Inc.
  5. Kato, Ryuta Ray, 2002. "Government Deficit, Public Investment, and Public Capital in the Transition to an Aging Japan," Journal of the Japanese and International Economies, Elsevier, vol. 16(4), pages 462-491, December.
  6. Joana Pereira & Philippe D Karam & Dirk Muir & Anita Tuladhar, 2010. "Macroeconomic Effects of Public Pension Reforms," IMF Working Papers 10/297, International Monetary Fund.
  7. Kato, Ryuta, 1998. "Transition to an Aging Japan: Public Pension, Savings, and Capital Taxation," Journal of the Japanese and International Economies, Elsevier, vol. 12(3), pages 204-231, September.
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Cited by:
  1. Kenichiro Kashiwase & Masahiro Nozaki & Kiichi Tokuoka, 2012. "Pension Reforms in Japan," IMF Working Papers 12/285, International Monetary Fund.

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