Future Changes of the Industrial Structure due to Aging and Soaring Demands for Healthcare Services in Japan - an Analysis Using a Multi-Sector OLG Model in an Open Economy -

Daisuke Ishikawa, Junji Ueda and Real Arai
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Daisuke Ishikawa: Policy Research Institute, Ministry of Finance Japan
Junji Ueda: Policy Research Institute, Ministry of Finance Japan

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: In order to quantify the effects of declining birthrate and changing demographic structure on the Japanese economy, we show the results of simulations by using a multi-sector dynamic general equilibrium model with overlapping generations (OLG) in an open economy. The model is constructed to incorporate substitutability between domestic products and imports and show the evolution of the industrial structure, reflecting the impacts of aging population from both supply and demand sides of the economy. Based on the scenario of increasing public demands for healthcare services, the share of healthcare sector expands to almost 2.5 times in 2050 relative to the base year 1985. The result of a simulation based on an alternative scenario where the government increases net transfer to the elderly shows smaller labor participation and GDP per capita, due to the income effects and crowding out of private capital by the increase of government debt outstanding in the long run.

Keywords: multi-sector OLG model; demographic change; soaring public healthcare spending (search for similar items in EconPapers)
JEL-codes: H51 H68 J11 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-07
New Economics Papers: this item is included in nep-age, nep-cmp, nep-dem, nep-dge and nep-hea
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:mof:wpaper:ron243

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