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Females, the Elderly, and Also Males: Demographic Aging and Macroeconomy in Japan

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  • KITAO Sagiri
  • MIKOSHIBA Minamo
  • TAKEUCHI Hikaru

Abstract

The speed and magnitude of the 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 in addition to 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 extensive margin and in productivity can significantly mitigate the effects of demographic aging on the macroeconomy and reduce fiscal pressures, despite a decline in wages 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 the labor supply and that create a more efficient allocation of male and female workers of all age groups will be critical to keeping government deficits under control and raising incomes across the nation.

Suggested Citation

  • KITAO Sagiri & MIKOSHIBA Minamo & TAKEUCHI Hikaru, 2019. "Females, the Elderly, and Also Males: Demographic Aging and Macroeconomy in Japan," Discussion papers 19039, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:19039
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    References listed on IDEAS

    as
    1. Richard Blundell & Monica Costa Dias & Costas Meghir & Jonathan Shaw, 2016. "Female Labor Supply, Human Capital, and Welfare Reform," Econometrica, Econometric Society, vol. 84, pages 1705-1753, September.
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    5. Selahattin İmrohoroğlu & Sagiri Kitao & Tomoaki Yamada, 2016. "Achieving Fiscal Balance In Japan," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 117-154, February.
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    More about this item

    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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