Firm-driven Management for Longevity Risk: Analysis of Lump-sum Forward Payments in Japanese Nursing Homes

Shinya Sugawara ()

No CIRJE-F-908, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: 　　 This paper analyzes a system of insuring longevity risk in Japan using a lump-sum forward payment of rent. The system is unique to the Japanese private nursing home market and forces homes to cover most of the longevity risk of residents. To consider the impact of this system, this study conducts a prediction analysis of a counterfactual situation in which the system is eliminated, based on a structural model for the industrial organization of the private nursing home market. For the prediction analysis, a flexible technique is proposed using a nonparametric Bayesian approach. The results indicate there is an excess consumer payment under the current system, for which the consumer can only be compensated if he or she lives for an unrealistically long time in a nursing home. This result provides rich implications for the amount of longevity risk nursing homes assume, as well as possible consumer welfare to be gained from a government intervention to change the situation.

Pages: 36 pages
Date: 2013-11
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Firm‐Driven Management of Longevity Risk: Analysis of Lump‐Sum Forward Payments in Japanese Nursing Homes (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2013cf908

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