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Spousal Tax Deduction, Social Security System and the Labor Supply of Japanese Married Women

This paper evaluates one of the most drastic reforms of the Japanese public health insurance started in year 2006, by numerically examining the reform in an aging Japan in a dynamic context with overlapping generations within a computable general equilibrium framework. Our simulation results are as follows. First of all, an increase in the co-payment rate, which is one of the most prominent changes in the reform, would result in higher economic growth as well as higher welfare since it stimulates private savings. Secondly, an increasing trend of the future national medical expenditure can mainly be explained by an aging population, and an increase in the co-payment rate has little effect to squeeze the national medical expenditure in the future. Thirdly, the effect of a decrease in the national medical expenditure, which can possibly be induced by the improvement in efficiency in the public provision of medical services, the promotion of preventative medical services, or technological progress in the medical field, on the future burdens of medical expenditures is very small. Finally, if the government implements a policy to keep the ratio of the national medical expenditure to GDP constant, then the government has to keep reducing the national medical expenditure over time, and the reduction rate should be 45 percent in year 2050. Such a policy also eventuates in lower economic growth until around year 2035. Our simulation results thus indicate that the reform is not so effective to reduce the future national medical expenditure, but it can achieve higher economic growth by stimulating private savings.

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File URL: http://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2009_15.pdf
File Function: First version, 2009
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Paper provided by Research Institute, International University of Japan in its series Working Papers with number EMS_2009_15.

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Length: 47 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:iuj:wpaper:ems_2009_15
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  1. Masaru Sasaki, 2002. "The Causal Effect of Family Structure on Labor Force Participation among Japanese Married Women," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 429-440.
  2. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  3. Ken Yamada, 2008. "Estimating labour supply and time allocation by married Japanese men and unmarried Japanese women," Applied Economics Letters, Taylor & Francis Journals, vol. 15(9), pages 659-666.
  4. Benjamin M. Friedman & Mark Warshawsky, 1985. "Annuity Prices and Saving Behavior in the United States," NBER Working Papers 1683, National Bureau of Economic Research, Inc.
  5. Benjamin M. Friedman & Mark Warshawsky, 1988. "Annuity Prices and Saving Behavior in the United States," NBER Chapters, in: Pensions in the U.S. Economy, pages 53-84 National Bureau of Economic Research, Inc.
  6. Kuroda, Sachiko & Yamamoto, Isamu, 2008. "Estimating Frisch labor supply elasticity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 566-585, December.
  7. Uwe E. Reinhardt, 2000. "Health Care for the Aging Baby Boom: Lessons from Abroad," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 71-83, Spring.
  8. Toshihiro Ihori & Ryuta Ray Kato & Masumi Kawade & Shun-ichiro Bessho, 2005. "Public Debt and Economic Growth in an Aging Japan," CIRJE F-Series CIRJE-F-372, CIRJE, Faculty of Economics, University of Tokyo.
  9. Hideo Akabayashi, 2006. "The labor supply of married women and spousal tax deductions in Japan—a structural estimation," Review of Economics of the Household, Springer, vol. 4(4), pages 349-378, December.
  10. M. Anne Hill, 1989. "Female Labor Supply in Japan: Implications of the Informal Sector for Labor Force Participation and Hours of Work," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 143-161.
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