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

45 Pages Posted: 14 Jan 2019

See all articles by Ellen McGrattan

Ellen McGrattan

University of Minnesota - Minneapolis

Kazuaki Miyachi

International Monetary Fund (IMF)

Adrian Peralta-Alva

International Monetary Fund (IMF)

Date Written: November 2018

Abstract

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 equilibriumoverlapping 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 bettermacroeconomic performance and higher welfare for most individuals than other financing options, including those of raising social security contributions, debtfinancing, and a uniform increase in health and long-term care copayments.

Keywords: Public expenditures and health, Health care spending, Retirement, Health care, Taxation, Aging, Social security, General equilibrium models, Social Security and Public Pensions, Health Insurance, Public and Private

JEL Classification: H51, H55, I13, E62

Suggested Citation

McGrattan, Ellen and Miyachi, Kazuaki and Peralta-Alva, Adrian, On Financing Retirement, Health, and Long-Term Care in Japan (November 2018). IMF Working Paper No. 18/249, Available at SSRN: https://ssrn.com/abstract=3314581

Ellen McGrattan (Contact Author)

University of Minnesota - Minneapolis ( email )

110 Wulling Hall, 86 Pleasant St, S.E.
308 Harvard Street SE
Minneapolis, MN 55455
United States

Kazuaki Miyachi

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Adrian Peralta-Alva

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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