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Subsidies for Elderly Care in Pay-As-You-Go Pension

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  • Masaya Yasuoka

    ()
    (School of Economics, Kwansei Gakuin University)

Abstract

In economically developed countries, aging of the population with fewer children is progressing. Social security benefits such as pensions and elderly care are increasing. In a society with fewer children, it is difficult for a government to provide sufficient pension benefits for older people if pay-as-you-go pensions are adopted because a decrease in the working population reduces tax revenues to provide pension benefits. Therefore, the pension contribution rate must be increased to provide sufficient pension benefits. This paper demonstrates that an increase in the pension contribution rate can not always raise pension benefits. However, if a government provides a subsidy for elderly care services and if aggregate demand for elderly care services increases, then the pension benefit can always increase because younger people purchase elderly care services and increase the labor supply instead of performing elderly care with their time. Moreover, this paper presents an examination of whether a subsidy for elderly care can raise the level of social welfare or not and shows that the subsidy can raise the social welfare level thanks to an increase in pension benefits.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp109.pdf
File Function: First version, 2013
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 109.

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Length: 18 pages
Date of creation: Sep 2013
Date of revision: Sep 2013
Handle: RePEc:kgu:wpaper:109

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Keywords: Aging society; Elderly care service; Pay-as-you-go pension;

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  1. Cremer, Helmuth & Roeder, Kerstin, 2011. "Long-term care policy, myopia and redistribution," TSE Working Papers 12-314, Toulouse School of Economics (TSE), revised May 2012.
  2. Meckl, Jürgen & Zink, Stefan, 2002. "Solow and Heterogeneous Labor: A Neoclassical Explanation of Wage Inequality," IZA Discussion Papers 668, Institute for the Study of Labor (IZA).
  3. Mizushima, Atsue, 2009. "Intergenerational transfers of time and public long-term care with an aging population," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 572-581, December.
  4. Ken-ichi Hashimoto & Ken Tabata, 2010. "Population aging, health care, and growth," Journal of Population Economics, Springer, vol. 23(2), pages 571-593, March.
  5. Tabata, Ken, 2005. "Population aging, the costs of health care for the elderly and growth," Journal of Macroeconomics, Elsevier, vol. 27(3), pages 472-493, September.
  6. Yasuoka, Masaya & Miyake, Atsushi, 2010. "Change in the transition of the fertility rate," Economics Letters, Elsevier, vol. 106(2), pages 78-80, February.
  7. Pauly, Mark V, 1990. "The Rational Nonpurchase of Long-term-Care Insurance," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 153-68, February.
  8. Miyazawa, Kazutoshi, 2010. "Old age support in kind," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(03), pages 445-472, July.
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