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Firm-driven Management for Longevity Risk: Analysis of Lump-sum Forward Payments in Japanese Nursing Homes

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  • Shinya Sugawara

    (Faculty of Economics, The University of Tokyo)

Abstract

   This paper analyzes a system of insuring longevity risk in Japan using a lump-sum forward payment of rent. The system is unique to the Japanese private nursing home market and forces homes to cover most of the longevity risk of residents. To consider the impact of this system, this study conducts a prediction analysis of a counterfactual situation in which the system is eliminated, based on a structural model for the industrial organization of the private nursing home market. For the prediction analysis, a flexible technique is proposed using a nonparametric Bayesian approach. The results indicate there is an excess consumer payment under the current system, for which the consumer can only be compensated if he or she lives for an unrealistically long time in a nursing home. This result provides rich implications for the amount of longevity risk nursing homes assume, as well as possible consumer welfare to be gained from a government intervention to change the situation.

Suggested Citation

  • Shinya Sugawara, 2013. "Firm-driven Management for Longevity Risk: Analysis of Lump-sum Forward Payments in Japanese Nursing Homes," CIRJE F-Series CIRJE-F-908, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2013cf908
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2013/2013cf908.pdf
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    References listed on IDEAS

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    Cited by:

    1. Sugawara, Shinya & Nakamura, Jiro, 2014. "Can formal elderly care stimulate female labor supply? The Japanese experience," Journal of the Japanese and International Economies, Elsevier, pages 98-115.
    2. Shinya Sugawara & Jiro Nakamura, 2014. "Incentive for Gatekeepers and Their Demand Inducement: An Empirical Analysis of Care Managers in the Japanese Long-Term Care Insurance," CIRJE F-Series CIRJE-F-916, CIRJE, Faculty of Economics, University of Tokyo.

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