{
  "title": "On Financing Retirement, Health, and Long-term Care in Japan",
  "publication": "IMF Working Papers, November 28, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/11/28/on-financing-retirement-health-and-long-term-care-in-japan-46355",
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  "summary": "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 equilibrium overlapping generations model, specifically parameterized",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Japan faces the problem of how to finance retirement, health, and long-term care expenditures as the population ages.\n- The paper analyzes the impact of policy options using a dynamic general equilibrium overlapping generations model, specifically parameterized to match both the macroeconomic and microeconomic level data of Japan.\n- Principal finding: financing the costs of aging through gradual increases in the consumption tax rate delivers a better macroeconomic performance and higher welfare for most individuals than other financing options considered."
    },
    {
      "heading": "Methodology",
      "content": "- Model: dynamic general equilibrium overlapping generations model.\n- Calibration: parameterized to match both macroeconomic and microeconomic level data of Japan.\n- Policy scenarios analyzed (as described in the summary):\n  - Gradual increases in the consumption tax rate.\n  - Raising social security contributions.\n  - Debt financing.\n  - Uniform increase in health and long-term care copayments."
    },
    {
      "heading": "Key Findings",
      "content": "- Gradual increases in the consumption tax rate:\n  - Deliver a better macroeconomic performance than the alternatives analyzed.\n  - Deliver higher welfare for most individuals relative to alternatives.\n- Other financing options analyzed include:\n  - Raising social security contributions.\n  - Debt financing.\n  - A uniform increase in health and long-term care copayments.\n- The model-based comparison indicates the consumption-tax path is superior on macroeconomic and welfare metrics for most individuals (as summarized in the paper)."
    },
    {
      "heading": "Policy Implications and Recommendations",
      "content": "- Preference for financing aging-related expenditures via gradual consumption tax increases over:\n  - Raising social security contributions.\n  - Relying on debt financing.\n  - Uniformly increasing copayments for health and long-term care.\n- Implicit recommendation: adopt consumption-tax-based financing to mitigate negative macroeconomic impacts and improve welfare outcomes for most individuals.\n\n---\n\n Content in this bundle\n\n- On Financing Retirement, Health, and Long-term Care in Japan, WP/18/249, November 2018\n  - On Financing Retirement, Health, and Long-term Care in Japan, WP/18/249, November 2018 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - On Financing Retirement, Health, and Long-term Care in Japan, WP/18/249, November 2018 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/11/28/on-financing-retirement-health-and-long-term-care-in-japan-46355"
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    "Authors: Ellen R. McGrattan, Kazuaki Miyachi",
    "Published: November 28, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484384718.001",
    "Japan faces the problem of how to finance retirement, health, and long-term care expenditures as the population ages.",
    "The paper analyzes the impact of policy options using a dynamic general equilibrium overlapping generations model, specifically parameterized to match both the macroeconomic and microeconomic level data of Japan.",
    "Principal finding: financing the costs of aging through gradual increases in the consumption tax rate delivers a better macroeconomic performance and higher welfare for most individuals than other financing options considered.",
    "Model: dynamic general equilibrium overlapping generations model.",
    "Calibration: parameterized to match both macroeconomic and microeconomic level data of Japan.",
    "Policy scenarios analyzed (as described in the summary):",
    "Gradual increases in the consumption tax rate:",
    "Other financing options analyzed include:",
    "The model-based comparison indicates the consumption-tax path is superior on macroeconomic and welfare metrics for most individuals (as summarized in the paper).",
    "Preference for financing aging-related expenditures via gradual consumption tax increases over:",
    "Implicit recommendation: adopt consumption-tax-based financing to mitigate negative macroeconomic impacts and improve welfare outcomes for most individuals.",
    "**On Financing Retirement, Health, and Long-term Care in Japan, WP/18/249, November 2018**"
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