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Females, the elderly, and also males: Demographic aging and macroeconomy in Japan

Sagiri Kitao () and Minamo Mikoshiba

Journal of the Japanese and International Economies, 2020, vol. 56, issue C

Abstract: The speed and magnitude of ongoing demographic aging in Japan are unprecedented. A rapid decline in the labor force and a rising fiscal burden to finance social security expenditures could hamper growth over a prolonged period. We build a dynamic general equilibrium model populated by overlapping generations of males and females who differ in participation rate, employment type and labor productivity as well as life expectancy. We study how changes in the labor market over the coming decades will affect the transition path of the economy and fiscal situation of Japan. We find that a rise in the labor supply of females and the elderly of both genders in an extensive margin and in labor productivity can significantly mitigate effects of demographic aging on the macroeconomy and reduce fiscal pressures, despite their negative effects on equilibrium wages during the transition. The study suggests that a combination of policies that remove obstacles hindering labor supply and that enhance a more efficient allocation of male and female workers of all age groups will be critical to keeping government deficit under control and raising income across the nation.

Keywords: Japanese economy; Demographic trends; Female and elderly labor force participation; Overlapping generation model (search for similar items in EconPapers)
JEL-codes: E62 J11 J21 H55 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: Females, the elderly, and also males: Demographic aging and macroeconomy in Japan (2019) Downloads
Working Paper: Females, the Elderly, and Also Males: Demographic Aging and Macroeconomy in Japan (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:56:y:2020:i:c:s0889158320300022

DOI: 10.1016/j.jjie.2020.101064

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