Future Changes of the Industrial Structure due to Aging and Soaring Demands for Healthcare Services in Japan - an Analysis Using a Multi-Sector OLG Model in an Open Economy -
AbstractIn order to quantify the effects of declining birthrate and changing demographic structure on the Japanese economy, we show the results of simulations by using a multi-sector dynamic general equilibrium model with overlapping generations (OLG) in an open economy. The model is constructed to incorporate substitutability between domestic products and imports and show the evolution of the industrial structure, reflecting the impacts of aging population from both supply and demand sides of the economy. Based on the scenario of increasing public demands for healthcare services, the share of healthcare sector expands to almost 2.5 times in 2050 relative to the base year 1985. The result of a simulation based on an alternative scenario where the government increases net transfer to the elderly shows smaller labor participation and GDP per capita, due to the income effects and crowding out of private capital by the increase of government debt outstanding in the long run.
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Bibliographic InfoPaper provided by Policy Research Institute, Ministry of Finance Japan in its series Discussion papers with number ron243.
Length: 38 pages
Date of creation: Jul 2012
Date of revision:
multi-sector OLG model; demographic change; soaring public healthcare spending;
Find related papers by JEL classification:
- J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
- H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-08-23 (Economics of Ageing)
- NEP-ALL-2012-08-23 (All new papers)
- NEP-CMP-2012-08-23 (Computational Economics)
- NEP-DEM-2012-08-23 (Demographic Economics)
- NEP-DGE-2012-08-23 (Dynamic General Equilibrium)
- NEP-HEA-2012-08-23 (Health Economics)
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- Real Arai & Junji Ueda, 2012.
"A Numerical Evaluation on a Sustainable Size of Primary Deficit in Japan,"
KIER Working Papers
823, Kyoto University, Institute of Economic Research.
- Real Arai & Junji Ueda, 2012. "A Numerical Evaluation on a Sustainable Size of Primary Deficit in Japan," Discussion papers ron235, Policy Research Institute, Ministry of Finance Japan.
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