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Females, the elderly, and also males: Demographic aging and macroeconomy in Japan

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  • Sagiri Kitao
  • Minamo Mikoshiba
  • Hikaru Takeuchi

Abstract

The speed and magnitude of ongoing demographic aging in Japan are unprecedented. A rapid decline in the labor force and a rising fiscal burden to finance social security expenditures could hamper growth over a prolonged period. We build a dynamic general equilibrium model populated by overlapping generations of males and females who differ in employment type and labor productivity as well as life expectancy. We study how changes in the labor market over the coming decades will affect the transition path of the economy and fiscal situation of Japan. We find that a rise in the labor supply of females and the elderly of both genders in an extensive margin and in labor productivity can significantly mitigate effects of demographic aging on the macroeconomy and reduce fiscal pressures, despite a decline in wage during the transition. We also quantify effects of alternative demographic scenarios and fiscal policies. The study suggests that a combination of policies that remove obstacles hindering labor supply and that enhance a more efficient allocation of male and female workers of all age groups will be critical to keeping government deficit under control and raising income across the nation.

Suggested Citation

  • Sagiri Kitao & Minamo Mikoshiba & Hikaru Takeuchi, 2019. "Females, the elderly, and also males: Demographic aging and macroeconomy in Japan," CAMA Working Papers 2019-37, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2019-37
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    References listed on IDEAS

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    1. Females, the elderly, and also males: Demographic aging and macroeconomy in Japan
      by Christian Zimmermann in NEP-DGE blog on 2019-07-07 00:17:31

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    Cited by:

    1. Eiji Yamamura, 2021. "View about consumption tax and grandchildren," Papers 2102.04658, arXiv.org.
    2. Andrea BONFATTI & Selahattin Ä°MROHOROÄžLU & KITAO Sagiri, 2019. "Aging, Factor Prices and Capital Flows," Discussion papers 19110, Research Institute of Economy, Trade and Industry (RIETI).
    3. Kikuchi, Shinnosuke & Kitao, Sagiri & Mikoshiba, Minamo, 2021. "Who suffers from the COVID-19 shocks? Labor market heterogeneity and welfare consequences in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 59(C).
    4. Fukuda, Shin-ichi & Okumura, Koki, 2020. "Regional convergence under declining population: The case of Japan," Japan and the World Economy, Elsevier, vol. 55(C).

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    More about this item

    Keywords

    Japanese Economy; Demographic Trends; Female and Elderly Labor Force Participation; Overlapping Generation Model.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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