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On Financing Retirement, Health Care, and Long-Term Care in Japan

Author

Listed:
  • Ellen R. McGrattan
  • Kazuaki Miyachi
  • Adrian Peralta-Alva

Abstract

Japan is facing the problem of how to finance retirement, health care, and long-term care expenditures as the population ages. This paper analyzes the impact of policy options intended to address this problem by employing a dynamic general equilibrium overlapping generations model, specifically parameterized to match both the macro- and microeconomic level data of Japan. We find that financing the costs of aging through gradual increases in the consumption tax rate delivers better macroeconomic performance and higher welfare for most individuals relative to other financing options, including raising social security contributions, debt financing, and a uniform increase in health care and long-term care copayments.

Suggested Citation

  • Ellen R. McGrattan & Kazuaki Miyachi & Adrian Peralta-Alva, 2019. "On Financing Retirement, Health Care, and Long-Term Care in Japan," Staff Report 586, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:586
    DOI: 10.21034/sr.586
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    References listed on IDEAS

    as
    1. Ellen R. McGrattan & Edward C. Prescott, 2017. "On financing retirement with an aging population," Quantitative Economics, Econometric Society, vol. 8(1), pages 75-115, March.
    2. Selahattin Imrohoroglu & Nao Sudo, 2011. "Productivity and Fiscal Policy in Japan: Short-Term Forecasts from the Standard Growth Model," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 29, pages 73-106, November.
    3. Juan C. Conesa & Carlos Garriga, 2008. "Optimal Fiscal Policy In The Design Of Social Security Reforms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 291-318, February.
    4. Nozaki, Masahiro & Kashiwase, Kenichiro & Saito, Ikuo, 2017. "Health spending in Japan: Macro-fiscal implications and reform options," The Journal of the Economics of Ageing, Elsevier, vol. 9(C), pages 156-171.
    5. Kitao, Sagiri, 2015. "Fiscal cost of demographic transition in Japan," Journal of Economic Dynamics and Control, Elsevier, vol. 54(C), pages 37-58.
    6. International Monetary Fund, 2010. "Peru: Staff Report for the 2010 Article IV Consultation," IMF Staff Country Reports 2010/098, International Monetary Fund.
    7. Hiroki Arato & Katsunori Yamada, 2012. "Japan's Intangible Capital and Valuation of Corporations in a Neoclassical Framework," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(4), pages 459-478, October.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Taxation; Aging; Health care; Japan; Retirement;
    All these keywords.

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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