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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 -

  • 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)

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.

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File URL: http://www.mof.go.jp/pri/research/discussion_paper/ron243.pdf
File Function: First version, 2012
Download Restriction: no

Paper provided by Policy Research Institute, Ministry of Finance Japan in its series Discussion papers with number ron243.

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Length: 38 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:mof:wpaper:ron243
Contact details of provider: Web page: http://www.mof.go.jp/pri/
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