RIETI Report August 2006

New Economics of Aging - from the perspective of the elderly

Amid a population aging at unparalleled speed, it is imperative for Japan to establish a sustainable social security system to provide a decent standard of living for the elderly without imposing a heavy burden on the young. Past research on the topic lacks multidisciplinary analysis and the data currently available is not sufficient for evaluating the effects of social security policies. RIETI's project "Toward a Comprehensive Resolution of Social Security Problems: A New Economics of Ageing," has undertaken integrated research to pinpoint the role of social security and help policymakers design effective policies. This study is considered a Japanese version of HRS/ELSA/SHARE (JHRS), modeled after the U.S. HRS (Health and Retirement Study), ELSA (English Longitudinal Study of Ageing) in the UK, and SHARE (Survey of Health, Ageing and Retirement in Europe) in Continental Europe. The JHRS aims to develop world standard panel data on the population over age 50, which will enable researchers to perform in-depth analysis on health and retirement and draw relevant policy implications. At the JHRS Workshop held on August 4-5, 2006, the project members exchanged views and opinions on this study with overseas researchers including Dr. David Weir (Principal Investigator [PI] for the HRS at the University of Michigan), Dr. Kenneth Langa (Co-investigator for the HRS at the University of Michigan), Dr. James Smith (PI for the SHARE / RAND Corporation), Dr. Arie Kapteyn (PI for the SHARE / RAND Corporation), and Dr. Richard Suzman. RIETI interviewed Faculty Fellow SHIMIZUTANI Satoshi, PI for the JHRS, about the origins and the current status of the study as well as the challenges and perspectives of the JHRS.

RIETI Featured Fellow

Dr. Shimizutani has been an Associate Professor of the Institute of Economic Research at Hitotsubashi University since April 2004. He also served as Counsellor at the Economic and Social Research Institute at the Cabinet Office, the Government of Japan from 2002-'04. Prior to this, he held key positions at government agencies such as the Quality-of-Life Policy Bureau, the Cabinet Office (2001-'02), and the Economic Planning Agency (1990-2000). His areas of expertise are micro-level empirical analysis of the Japanese economy, macroeconomics, and health economics. Dr. Shimizutani received a Ph.D. in Economics and an M.A. in Applied Economics from the University of Michigan, and a B.A. in Law from the University of Tokyo. His major publications include Kitai to fukakujitsusei no keizaigaku - defure keizai no mikuro jissho bunseki [Expectations and uncertainty in a deflationary economy - a microeconomic analysis of the Japanese economy], Nihon Keizai Shimbun, 2005; Kaigo hoiku service shijou no keizai bunseki -- micro data niyoru jittai kaimei to seisaku teigen [An economic analysis on the elderly and child care in Japan: micro-level investigation with policy implication] (with H. Noguchi) Toko-Keizai Shimpo, 2004; "Nonprofit and For-profit Providers in Japan's At-home Care Industry: Evidence on Quality of Service and Household Choice," (with H. Noguchi) Economics Bulletin, vol.9, no.3, 2005; "Aged-Care Support in Japan: Perspectives and Challenges," (with O. Mitchell and J. Piggott) Benefits Quarterly, 1st Quarter 2006; and "Nonprofit/For-Profit Status and Earning Differentials in the Japanese At-home Elderly Care Industry: Evidence from Micro-level Data on Home Helpers and Staff Nurses," (with H. Noguchi) Journal of the Japanese and International Economies, forthcoming.

For a detailed biography,
http://www.rieti.go.jp/users/shimizutani-satoshi/index_en.html

Interview

RIETI: You have led the Japan Health and Retirement Study (JHRS), a Japanese version of similar studies (HRS/ELSA/SHARE), since 2005. Could you tell us the origins and current status of this study?

Shimizutani: It all began in 2004, when RIETI President and CRO Masaru Yoshitomi, who is very interested in social security system reform, asked me to tackle the issue of a "new economics of aging." Traditional analysis of the social security system was divided vertically, with separate studies on pensions, medical, and long-term care. Moreover, the main theme of most of these studies was how much the younger generation would have to shoulder as the number of elderly continues to increase - in other words, how to secure ample funds and strike a balance between benefits and burdens. But our research is completely different. Senior citizens not only receive pensions, but also raise their quality of life by receiving various services such as medical and long-term care. At the same time, matters such as their health, employment status, the assets they hold, ties with their families and their links with friends and their communities must also be taken into account. Therefore, in order to study the economics of aging, we need to conduct an analysis not from the viewpoint of the government but that of the elderly. What we need to do initially is adapt a different approach.

The actual situations of elderly people vary widely. We need to check current social security policies by collecting comprehensive data from all sorts of people, such as those who are 65 and working, those who are 90 and bedridden, people who live alone, and people who live with their families. Such studies have already been undertaken in other parts of the world, and a global standard has already been established. The United States' Health and Retirement Study (HRS) was launched in 1992, Mexico's Mexican Health and Aging Study (MHAS) in 2001, the English Longitudinal Study of Ageing (ELSA) in 2002 in the UK, and Continental Europe's Survey of Health, Ageing and Retirement in Europe (SHARE) was launched in 2004 with the participation of 11 countries, with Poland and Israel joining later. South Korea has already started a Korean Longitudinal Study of Aging (KLoSA), and China and Thailand are also planning to launch similar studies. However, no such study had begun in Japan, where society is rapidly aging. Thus it was decided to launch a study modeled after HRS/ELSA/SHARE, and I became a faculty fellow at REITI in May 2005. Since then I have moved the project forward, visiting the University of Michigan in August to exchange views and receive advice from researchers involved in HRS and SHARE. Two pilot studies were conducted during the last fiscal year and the first wave of the JHRS is to be launched at the beginning of 2007.

RIETI: The questionnaires of the pilot studies are based on the Survey of Health, Ageing and Retirement in Europe (SHARE) and tailored taking into consideration Japanese institutions, systems, customs, and other social idiosyncrasies. What was most difficult in accommodating these factors?

Shimizutani: When Dr. Hidehiko Ichimura (RIETI Faculty Fellow / Professor of Economics, Graduate School of Public Policy, The University of Tokyo) and I visited the University of Michigan last year, we asked Dr. Robert Willis, the principal investigator on HRS, how we should proceed with the project. His advice was that "SHARE, which is conducted in more than 10 nations in Continental Europe and whose questions are common for all participating countries, may be better than the HRS, in which many questions are characteristic of the U.S." Although SHARE is said to be a common questionnaire in Europe, the situation there is quite different from that in Japan. During the recent workshop the most difficult areas to adapt to Japan were identified as health, medical, and long-term care. In terms of the economy, questions regarding such issues as income, consumption, and assets are essentially the same, regardless of country. However, there are huge differences among countries when it comes to health and medical care. For example, there are those who argue that if we were to apply the global criteria for depression to Japanese, a majority of people would be diagnosed as sufferers, so it would be problematic to apply them without modification. Also, the issue of how to set the unit for study samples also cropped up during the workshops. While the units used in the U.S. are couples or single people, there are still many cases in Japan where children look after their parents even though Japan today is said to have become more nuclear family-oriented, and units for samples are complex. The lives of elderly people are greatly affected by differences in family structures, and so questions tailor-made for Japan must also be added in the area of long-term care. Addressing such points is very difficult.

RIETI: According to your report on the pilot studies, response rates to the survey were approximately 30%, less than those of the HRS (U.S.) and SHARE (Europe). In the U.S., various efforts were taken to improve response rates - advanced publicity, effective methods of telephone interviewing, 4-5 days training for interviewers and conducting proxy interviews. What measures should the JHRS take to increase the response rates?

Shimizutani: Naturally, all of these things should be implemented. Among them, training for interviewers is especially important. For the pilot studies project members including myself served as instructors for half-day training sessions, but because this is insufficient we are thinking of further enhancing and lengthening the training program. In addition, there are plans to have the University of Michigan dispatch trainers to Japan for a program called TTT (Train-the-Trainer). In the U.S., many efforts have been made to improve the quality of interviewers, such as letting go those with poor records and giving bonuses to those who produce good results. However, there are differences between the U.S. and Japan in the background for the studies. While the interviewers for the HRS are staffers at the University of Michigan, there is a difficulty in that in Japan we need to rely on survey companies. Moreover, it is also very important to advertise the survey in advance and to secure the cooperation of local governments.

There is the argument that the response rate in Japan will be low because of the Personal Information Protection Law, and that this is unavoidable, but I do not believe this is completely true. In April and May of this year, I surveyed residents of the former village of Yamakoshi, Niigata Prefecture, on the Chuetsu Earthquake together with Dr. Ichimura and Dr. Yasuyuki Sawada (Associate Professor, Graduate School of Economics, The University of Tokyo). Through such means as making posters, visiting the area many times and repeatedly making adjustments to ensure that the questionnaire matched the actual situation, we were able to achieve a high response rate of 90%. This shows it is possible to boost the response rate by applying different ideas. I hope to implement steps that can be used in Japan, not to mention improving the ability and skills of interviewers.

RIETI: As the aging problem involves various issues, it requires multidisciplinary study. The current project members of the JHRS consist of economists as well as public health and medical experts. Will specialists in areas like sociology and psychology be included among the project members, as with the HRS? If not, how could the JHRS tackle multidisciplinary issues?

Shimizutani: There are indeed such plans. Even now, we have been searching for experts in such fields as sociology and psychology who have a good understanding of our project and can work with us. However, even among those are Japanese, many live overseas, and due to various problems we are not making a great deal of progress on this point. In the area of sociology RIETI Visiting Fellow Kazuo Yamaguchi, a Professor in Department of Sociology at the University of Chicago introduced us to some experts who provided us with excellent advice. However, generally speaking, views can differ greatly among those who study different disciplines, and at times the discussions do not mesh well. But even with these problems, we are continuing to look for and contact people with a good understanding of the project. We would like such people to join the project as soon as possible. Incidentally, Dr. Yamaguchi kindly accepted our offer to join the project, which will enable us to seek more multidisciplinary collaboration.

RIETI: What are the benefits of compiling this information? What policy implications do you hope to derive from the results?

Shimizutani: The pilot surveys we conducted so far did not cover that many samples, but we will start the first wave at the beginning of next year with a larger number (aiming for a final figure of 10,000 samples). What we especially want to do is see how such elements as labor supply, health, medical, and long-term care demand for the elderly, as well as such economic factors as income, consumption, and assets are determined. Another task is to conduct a quantitative analysis of the effects of social security policies that influence these factors. For example, one problem is that some people who in reality have the desire to work decide not to do so if they can receive pension benefits. On the other hand, amid the declining fertility and the graying of society, there is a contradicting policy objective of actively encouraging senior citizens who are interested in doing so to work. What is important is that policies are designed so as not to throw a wet blanket on the desire among elderly people to work. There are those who argue that it is irrational for senior citizens who have the right to receive pensions to have their benefits reduced if they work, but what is important is to first know the extent to which such a phenomenon is taking place. By doing so, we can design policies that do not dampen the desire of those who want to work more.

In terms of health issues, the costs of medical and long-term care are growing at an incredible rate. Prices for such services are set by the government through a fee-for-service system. It is extremely important to analyze the impact that changes in the unit price for the fees and the amount that patients pay out of their own pockets has on demand. In economics, demand should decline when prices rise in general. However, we need to analyze how much demand actually falls, or whether it does not decrease that much, for example when the percentage of the bill paid by patients is hiked to 30% from 10%. Policymaking will change greatly dependant upon the results, and it is only then that we will be able to clarify the extent to which the government should play a role in supporting those who will truly be in dire straits when prices are raised.

In August last year, Dr. Ichimura and I asked Dr. Richard Suzman of the National Institute of Aging (NIA) the extent to which the U.S. based its social security policies on the HRS, and he clearly stated "entirely." U.S. policymakers formulate future social security policies after checking via the HRS how effective past policies have been. This is extremely important. This sort of thing is very rare in Japan, and in most cases policies here have been crafted based on misguided assumptions. I believe that if the JHRS becomes a research success for RIETI and becomes directly helpful in the drafting of policies relevant to medical and long-term care services, pensions, and employment, the fruits of our efforts will be returned not only to Japan but also to the world.

EVENTS INFORMATION

Brown Bag Lunch Seminars

All BBLs run 12:15 - 13:45, unless otherwise stated.

09/05 
"VINNOVA and its Role in the Swedish Innovation System: Accomplishments Since the Start in 2001 and Ambitions Forward"
Speaker: Per ERIKSSON, Director General, VINNOVA (The Swedish Governmental Agency for Innovation Systems)

09/07 
"Diagnosing Public Service Value - Learning from the Osaka City Government Reform Project" (in Japanese)
Speaker: UEYAMA Shinichi, Professor, Graduate School of Media and Governance, Keio University and INOSHITA Yasutomo, Manager for Project Evaluation, Reform Promotion Division, Office of City Reforms, Osaka City Government

09/12
"Market, Development, and Poverty Reduction in Developing Countries: A Micro-Perspective" (in Japanese)
Speaker: SAWADA Yasuyuki, Associate Professor, Graduate School of Economics, Faculty of Economics, The University of Tokyo

For a complete list of past and upcoming BBL Seminars, http://www.rieti.go.jp/en/events/bbl/index.html


Fellow titles and links in the text are as of the date of publication.

For questions or comments regarding RIETI Report, please contact the editors.

RIETI Report is published monthly.

This month's featured article

New Economics of Aging - from the perspective of the elderly

SHIMIZUTANI SatoshiConsulting Fellow, RIETI

Event Information

For a complete list of past and upcoming event information.

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BBL Seminars

Fellow titles and links in the text are as of the date of publication.

For questions or comments regarding RIETI Report, please contact the editors.

RIETI Report is published monthly.