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Simulating Public Pension Reforms in an Aging Japan: Welfare Analysis with LSRA Transfers

Author

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  • Akira Okamoto

    (Okayama University)

Abstract

This paper explores the effect of different public pension schemes on economic welfare, and intergenerational and intragenerational equity. Besides the benchmark case based on the 2004 public pension reform, the paper considers two alternative cases: first, the financing of the basic pension benefit by a consumption tax, and second, the elimination of the earningsrelated pension benefit. To distinguish potential efficiency gains or losses from possibly offsetting changes in the welfare of different generations, the paper introduces the Lump Sum Redistribution Authority (LSRA). The simulation results suggest that although consumption tax financing of only a basic pension increases economic output by inducing capital formation, even with LSRA transfers it may not bring about a Pareto improvement.

Suggested Citation

  • Akira Okamoto, 2013. "Simulating Public Pension Reforms in an Aging Japan: Welfare Analysis with LSRA Transfers," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 9(4), pages 597-632, September.
    • Handle: RePEc:mof:journl:ppr023b
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    References listed on IDEAS

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    2. Reona Hagiwara, 2022. "Welfare Effects of Health Insurance Reform: The Role of Elastic Medical Demand," IMES Discussion Paper Series 22-E-05, Institute for Monetary and Economic Studies, Bank of Japan.

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    More about this item

    Keywords

    Aging population; Pension reform; Consumption tax; Pareto improvement; Simulation analysis;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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