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What Do Microsimulations Tell Us about Fiscal Costs of the Newly Launched Income Contingent Loans in Japan?

Author

Listed:
  • Masaaki KAWAGOE
  • Yukiko ITO
  • Masato TAKARA

Abstract

This study estimates the fiscal costs incurred by the income contingent loans launched in April 2017 using a microsimulation approach. The study identifies three factors to understand how costly the loan scheme is: discount rate, female working conditions, and income mobility. The largest costs include about 40% of the mean loan outstanding at the time of graduation that would not be repaid in present discount value terms. This amount may be reduced as the discount rate falls from 2%, as more married females continue working at higher wages, and as more income dynamics are introduced, such as changes in the percentiles of income distributions during individuals’ lives. The costs would be, on average, 20 percentage points higher than their fixed repayment counterparts.

Suggested Citation

  • Masaaki KAWAGOE & Yukiko ITO & Masato TAKARA, 2018. "What Do Microsimulations Tell Us about Fiscal Costs of the Newly Launched Income Contingent Loans in Japan?," ESRI Discussion paper series 343, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esj:esridp:343
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    File URL: http://www.esri.go.jp/jp/archive/e_dis/e_dis343/e_dis343.pdf
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    Cited by:

    1. Armstrong, Shiro & Dearden, Lorraine & Kobayashi, Masayuki & Nagase, Nobuko, 2019. "Student loans in Japan: Current problems and possible solutions," Economics of Education Review, Elsevier, vol. 71(C), pages 120-134.

    More about this item

    Keywords

    microsimulation; income contingent loan; higher education; fiscal costs JEL classifications: D14; I22; I23; I28; J22;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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