The Incidence of Health Insurance Costs: Empirical evidence from Japan

Empirical studies on the incidence of social security contributions in Japan have produced conflicting results. Against this background, the present study, using new panel data, examines the extent to which employers' health insurance contributions have been shifted to employees through the adjustment of wages following a major reform of the way insurance contributions are calculated. The results indicate that a large part of employers' contribution burden was shifted to employees, and that this tendency was particularly pronounced for health insurers with a large number of insurees. This finding is consistent with the view that the labour supply in Japan is inelastic with regard to changes in wages. Furthermore, the empirical results suggest that the increase in employers' insurance burden following the reform was not passed on to employees immediately but rather over time through the gradual adjustment of wages.