On Financing Retirement, Health, and Long-term Care in Japan

By Ellen R. McGrattan, Kazuaki Miyachi, Adrian Peralta Alva

November 28, 2018

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Ellen R. McGrattan, Kazuaki Miyachi, and Adrian Peralta Alva. On Financing Retirement, Health, and Long-term Care in Japan, (USA: International Monetary Fund, 2018) accessed December 30, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Japan faces the problem of how to finance retirement, health, and long-term care expenditures as the population ages. This paper analyzes the impact of policy options intended to address this problem by employing a dynamic general equilibrium overlapping generations model, specifically parameterized to match both the macroeconomic and microeconomic level data of Japan. We find that financing the costs of aging through gradual increases in the consumption tax rate delivers a better macroeconomic performance and higher welfare for most individuals than other financing options, including those of raising social security contributions, debt financing, and a uniform increase in health and long-term care copayments.

Subject: Aging, Consumption taxes, Health, Income, National accounts, Population and demographics, Public debt, Taxes

Keywords: Aging, Consumption tax, Consumption taxes, Copayment rate, Global, Health care, Income, Income spectrum, Japan, Labor income, Retirement, Taxation, Taxation scenario, WP

Publication Details

Pages:

44
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/249
Stock No:

WPIEA2018249
ISBN:

9781484384718
ISSN:

1018-5941

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