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Public Debt and Economic Growth in an Aging Japan

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Author Info
Toshihiro Ihori (Faculty of Economics, University of Tokyo)
Ryuta Ray Kato (Graduate School of International Relations, International Univesity of Japan)
Masumi Kawade (Faculty of Economics, Niigata University)
Shun-ichiro Bessho (Policy Research Institute, Ministry of Finance, Japanese Government)
Abstract

This@paper@examines@the@effects of the demographic change and the government debt policy in Japan on economic growth and economic welfare, particularly by taking into account the existing public pension scheme as well as national medical expenditure through the existing public health insurance, wherea computational overlapping generations model is used within a general equilibrium context. One of the main results of this paper is that the tax burden (GDP) ratio will increase up to about 36%, and the social security burden (GDP) ratio will increase up to 23.3% in 2050, even though the government tries to have a positive primary balance by 2010. The ratio of public health insurance bene?ts to GDP is expected to increase at 1% every 10years, and the ratio will be around 9.6%in 2050. The 2004 public pension reform will successfully result in a 13 point decrease in the contribution rate from 36.44% to 23.53%, and reduce the social security burden (GDP) ratio by about 8 points from 23.27% to 15.02% in 2050, compared with the benchmark case.

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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-372.

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Length: 47 pages
Date of creation: Sep 2005
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Handle: RePEc:tky:fseres:2005cf372

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