Population Aging, Health Care, and Fiscal Policy Reform: The challenges for Japan

Author Name HSU Minchung (National Graduate Institute for Policy Studies (GRIPS)) / YAMADA Tomoaki (Meiji University)
Creation Date/NO. March 2017 17-E-038
Research Project Fiscal and Social Security Policy under a Low Birth Rate and Aging Demographics
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This paper quantitatively studies the influence of a rapidly aging population on the financing of a public universal health insurance system and the corresponding fiscal policies. We construct a general equilibrium life-cycle model to investigate the effects of aging and evaluate various policy alternatives designed to lessen the negative influence of aging. In particular, we analyze the reforms of insurance benefits and tax financing tools that were the recent focus of a great amount of attention and debate in Japan because of the tense financial situation. We show that although the potential reforms significantly improve the welfare of future generations, political implementation of such reforms is difficult because of the large welfare costs for the current population. Our analysis suggests that a gradual reform with an intergenerational redistribution will be more implementable politically than a sudden reform.

Published: Hsu, Minchung and Tomoaki Yamada, 2019. "Population aging, health care and fiscal policy reform: The challenges for Japan," Scandinavian Journal of Economics, Vol. 121(2), pp. 547-577