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

  • Akira Okamoto

    (Okayama University)

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    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.

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    File URL: http://www.mof.go.jp/english/pri/publication/pp_review/ppr023/ppr023b.pdf
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    Article provided by Policy Research Institute, Ministry of Finance Japan in its journal Public Policy Review.

    Volume (Year): 9 (2013)
    Issue (Month): 4 (September)
    Pages: 597-632

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    Handle: RePEc:mof:journl:ppr023b
    Contact details of provider: Web page: http://www.mof.go.jp/pri/
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    1. R. Anton Braun & Daisuke Ikeda & Douglas H. Joines, 2007. "The Saving Rate in Japan: Why It Has Fallen and Why It Will Remain Low," CIRJE F-Series CIRJE-F-535, CIRJE, Faculty of Economics, University of Tokyo.
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    3. Toshihiro Ihori & Ryuta Ray Kato & Masumi Kawade & Shun-ichiro Bessho, 2005. "Public Debt and Economic Growth in an Aging Japan," CARF F-Series CARF-F-046, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
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    7. Akira Okamoto, 2005. "Simulating fundamental tax reforms in an aging Japan," Economic Systems Research, Taylor & Francis Journals, vol. 17(2), pages 163-185.
    8. Alan J. Auerbach & Ronald Lee, 2009. "Welfare and Generational Equity in Sustainable Unfunded Pension Systems," NBER Working Papers 14682, National Bureau of Economic Research, Inc.
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    13. Brunner, Johann K., 1993. "Transition from a pay-as-you-go to a fully-funded pension system: The case of differing individuals and intragenerational fairness," Discussion Papers, Series I 266, University of Konstanz, Department of Economics.
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    15. Fumio Hayashi & Edward C. Prescott, 2000. "The 1990s in Japan: a lost decade," Working Papers 607, Federal Reserve Bank of Minneapolis.
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