Ryuta Ray Kato

Public Debt and Economic Growth in an Aging Japan

This paper examines the effects of the demographic change and the government debt policy in Japan on economic growth and economic welfare, particularly by taking into account the existing public pension scheme as well as national medical expenditure through the existing public health insurance, where a computable overlapping generations model is used within a general equilibrium context. One of the main results of this paper is that the tax burden (GDP) ratio will increase up to about 36%, and the social security burden (GDP) ratio will increase up to 23.3% in 2050, even though the government tries to have a positive primary balance by 2010. The ratio of public health insurance benefits to GDP is expected to increase at 1% every 10 years, and the ratio will be around 9.6% in 2050. The 2004 public pension reform will successfully result in a 13 point decrease in the contribution rate from 36.44% to 23.53%, and reduce the social security burden (GDP) ratio by about 8 points from 23.27% to 15.02% in 2050, compared with the benchmark case.

Government Deficits in an Aging Japan

This chapter examines the effects of government deficits and public pension policies on the tax burden, capital accumulation and economic welfare in the transition to an aging Japan by applying a simulated method in the expanded life cyclegeneral equilibrium growth model.

Female Labor Supply, Social Security, and Fiscal Consolidation

This paper numerically examines the impact of expanding female labor supply on economic growth and the government revenue in an aging Japan within a dynamic general equilibrium framework with multi-period overlapping generations. The difference in full-time and non full-time workers of both male and female labor force is explicitly considered. Simulation results indicate that even if all potential female labor force who cannot work currently due to child care becomes full-time workers and thus labor force in efficiency is most expanded, the impact of such an increase on the Japanese economy and fiscal consolidation through an increase in tax revenue as well as contributions to the public pension scheme is very much limited. Even in the most expanding case, production only increases by 1.50 % and the improvement in the government budget would be 1.34–1.46 % in year 2050. The most crucial reason of such limited impacts is found in the large gap in the wage profile between male and female workers, and if the gap vanishes, the impact drastically becomes quite large.

Regulated medical fee schedule of the Japanese health care system.

This study presents a theoretical framework for examining the effect of the Japanese government-regulated medical price schedule, ‘Shinryo-Houshu-Seido,’ on the behavior of medical providers. In particular, we discuss the optimal rule of this price schedule for the regulator, taking into account information asymmetry between the regulator and providers. Our simple model predicts that heterogeneous providers either under-provide or over-provide medical inputs in comparison with the socially optimal outcome. Moreover, our results show that when the allocated budget is reduced to a certain level, even the second-best outcome becomes unachievable, no matter how the price schedule is regulated. While the limited budget size is shown to have a clear negative effect on social welfare, we suggest that the prospect of obtaining the second-best outcome is left to negotiation between the regulator and the budget allocator.