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Intergenerational Implications of Fiscal Consolidation in Japan

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  • Kiichi Tokuoka

Abstract

In Japan, intergenerational inequality in lifetime resources is substantial, with a heavier fiscal burden on the young than the old. Moreover, given the need for fiscal consolidation, the inequality is even worse than existing policy would suggest. However, this does not mean that fiscal consolidation would make the young worse off. Lack of fiscal consolidation would eventually increase interest rates, which would reduce output and hit young generations harder. Simulations using an overlapping generations model indicate that, from the perspective of intergenerational fairness, it would be desirable to include both social security spending reforms and revenue measures in a fiscal consolidation package. The simulations also show that delaying fiscal consolidation could be costly and worsen intergenerational resource inequality.

Suggested Citation

  • Kiichi Tokuoka, 2012. "Intergenerational Implications of Fiscal Consolidation in Japan," IMF Working Papers 12/197, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/197
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    References listed on IDEAS

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    1. Jonathan Gruber & Kevin Milligan & David A. Wise, 2009. "Social Security Programs and Retirement Around the World: The Relationship to Youth Employment, Introduction and Summary," NBER Working Papers 14647, National Bureau of Economic Research, Inc.
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    6. Kato, Ryuta Ray, 2002. "Government Deficit, Public Investment, and Public Capital in the Transition to an Aging Japan," Journal of the Japanese and International Economies, Elsevier, vol. 16(4), pages 462-491, December.
    7. Joana Pereira & Philippe D Karam & Dirk V Muir & Anita Tuladhar, 2010. "Macroeconomic Effects of Public Pension Reforms," IMF Working Papers 10/297, International Monetary Fund.
    8. Kazumasa, Oguro & Junichiro, Takahata & Manabu, Shimasawa, 2009. "Child Benefit and Fiscal Burden: OLG Model with Endogenous Fertility," MPRA Paper 16132, University Library of Munich, Germany.
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    Cited by:

    1. Elif C Arbatli & Csaba Feher & Jack J Ree & Ikuo Saito & Mauricio Soto, 2016. "Automatic Adjustment Mechanisms in Asian Pension Systems?," IMF Working Papers 16/242, International Monetary Fund.
    2. Tanweer Akram & Huiqing Li, 2016. "The Empirics of Long-Term US Interest Rates," Economics Working Paper Archive wp_863, Levy Economics Institute.
    3. Kenichiro Kashiwase & Masahiro Nozaki & Kiichi Tokuoka, 2012. "Pension Reforms in Japan," IMF Working Papers 12/285, International Monetary Fund.
    4. Tanweer Akram, 2016. "Japan's Liquidity Trap," Economics Working Paper Archive wp_862, Levy Economics Institute.
    5. Akram, Tanweer & Li, Huiqing, 2017. "What keeps long-term U.S. interest rates so low?," Economic Modelling, Elsevier, vol. 60(C), pages 380-390.
    6. Tanweer Akram & Anupam Das, 2015. "Does Keynesian Theory Explain Indian Government Bond Yields?," Economics Working Paper Archive wp_834, Levy Economics Institute.
    7. Tanweer Akram & Anupam Das, 2014. "The Determinants of Long-Term Japanese Government Bonds' Low Nominal Yields," Economics Working Paper Archive wp_818, Levy Economics Institute.
    8. repec:eee:joecag:v:8:y:2016:i:c:p:85-93 is not listed on IDEAS
    9. repec:wsi:afexxx:v:12:y:2017:i:03:n:s2010495217500117 is not listed on IDEAS

    More about this item

    Keywords

    Social security; Population; Fiscal policy; Intergenerational inequality; Fiscal consolidation; Overlapping generations model; pension; pension benefits; public pension; pension contribution;

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