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Financing Health Care in Japan: The Impact of an Aging Population


  • Tomoaki Yamada

    (Meiji University)

  • Minchung Hsu


  • Gary D. Hansen



This is a description of some work in progress aimed at providing a quantitative analysis of the impact of population aging in Japan on financing its National Health Insurance program. We construct a general equilibrium life-cycle economy that is used to study the impact of an aging population (an increased dependency ratio and increased per capita medical expenditures) on household's work and savings behavior, as well as on aggregate output and welfare. In particular, taking 2010 as an initial starting point, we calculate the transition path predicted by our model as the population structure changes and medical costs increase, using values for 2055 to construct a terminal steady state. We also evaluate various policy alternatives designed to lessen the negative impact of aging on the economy.

Suggested Citation

  • Tomoaki Yamada & Minchung Hsu & Gary D. Hansen, 2011. "Financing Health Care in Japan: The Impact of an Aging Population," 2011 Meeting Papers 717, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:717

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    References listed on IDEAS

    1. Eric French, 2005. "The Effects of Health, Wealth, and Wages on Labour Supply and Retirement Behaviour," Review of Economic Studies, Oxford University Press, vol. 72(2), pages 395-427.
    2. Yasushi Iwamoto & Miki Kohara & Makoto Saito, 2006. "On the Consumption Insurance Effects of Long-term Care Insurance In Japan: Evidence from Micro Household Data," CARF F-Series CARF-F-081, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    3. Krueger, Dirk & Ludwig, Alexander, 2007. "On the consequences of demographic change for rates of returns to capital, and the distribution of wealth and welfare," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 49-87, January.
    4. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
    5. Carroll, Christopher D., 2006. "The method of endogenous gridpoints for solving dynamic stochastic optimization problems," Economics Letters, Elsevier, vol. 91(3), pages 312-320, June.
    6. Jeske, Karsten & Kitao, Sagiri, 2009. "U.S. tax policy and health insurance demand: Can a regressive policy improve welfare?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 210-221, March.
    7. Shinichi Nishiyama & Kent Smetters, 2005. "Consumption Taxes and Economic Efficiency with Idiosyncratic Wage Shocks," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1088-1115, October.
    8. Abe, Naohito & Yamada, Tomoaki, 2009. "Nonlinear income variance profiles and consumption inequality over the life cycle," Journal of the Japanese and International Economies, Elsevier, vol. 23(3), pages 344-366, September.
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