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Future Changes of the Industrial Structure due to Aging and Soaring Demands for Healthcare Services in Japan - an Analysis Using a Multi-Sector OLG Model in an Open Economy -

Author

Listed:
  • Daisuke Ishikawa

    (Policy Research Institute, Ministry of Finance Japan)

  • Junji Ueda

    (Policy Research Institute, Ministry of Finance Japan)

  • Real Arai

    (Graduate School of Social Sciences, Hiroshima University)

Abstract

In order to quantify the effects of declining birthrate and changing demographic structure on the Japanese economy, we show the results of simulations by using a multi-sector dynamic general equilibrium model with overlapping generations (OLG) in an open economy. The model is constructed to incorporate substitutability between domestic products and imports and show the evolution of the industrial structure, reflecting the impacts of aging population from both supply and demand sides of the economy. Based on the scenario of increasing public demands for healthcare services, the share of healthcare sector expands to almost 2.5 times in 2050 relative to the base year 1985. The result of a simulation based on an alternative scenario where the government increases net transfer to the elderly shows smaller labor participation and GDP per capita, due to the income effects and crowding out of private capital by the increase of government debt outstanding in the long run.

Suggested Citation

  • Daisuke Ishikawa & Junji Ueda & Real Arai, 2012. "Future Changes of the Industrial Structure due to Aging and Soaring Demands for Healthcare Services in Japan - an Analysis Using a Multi-Sector OLG Model in an Open Economy -," Discussion papers ron243, Policy Research Institute, Ministry of Finance Japan.
    • Handle: RePEc:mof:wpaper:ron243
    as

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    File URL: http://warp.ndl.go.jp/info:ndljp/pid/10248500/www.mof.go.jp/pri/research/discussion_paper/ron243.pdf
    File Function: First version, 2012
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    Citations

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    Cited by:

    1. Arai, Real & Ueda, Junji, 2013. "A numerical evaluation of the sustainable size of the primary deficit in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 30(C), pages 59-75.
    2. Howard, Peter & Sterner, Thomas, 2014. "Raising the Temperature on Food Prices: Climate Change, Food Security, and the Social Cost of Carbon," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170648, Agricultural and Applied Economics Association.
    3. Real Arai & Masahiko Nakazawa, 2014. "A numerical analysis of Japan's fiscal sustainability in a simple OLG model," Applied Economics Letters, Taylor & Francis Journals, vol. 21(17), pages 1194-1197, November.

    More about this item

    Keywords

    multi-sector OLG model; demographic change; soaring public healthcare spending;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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