Impact of Aging and Social Security Changes on Macro-Economy - Simulation Analysis by the Model for Medium- to Long- Term Perspectives of Japanese Economy (Mark I) - (in Japanese)

Koichi Hasegawa, Masahiro Hori and Tomoyuki Suzuki

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: Japanese economy is faced with drastic aging and decline in birthrate. Under such situations, many difficulties are expected to be in the reconstruction of public finance and social security reform. To numerically simulate the problems in 21st century, we develop a new macro-econometric model called 'the Model for Medium- to Long-Term Perspectives of Japanese Economy (Mark I)'. The notable features of the model are as follows: •The model consists of three sub models (Population Dynamics Model, Macro Economy Model, and Public Finances and Social Security Model) that are interdependent each other. •The dynamics of the model is governed by supply-and-demand adjustment mechanism over medium to long terms. With the model, we performed two simulation analysis about the impact of aging and social security changes on Japanese economy. Although the model and assumptions of the simulations are provisional, the results can be summarized as follows: •The decline in birthrates negatively affects Japanese economy mainly through its supply side; however, the negative effects become obvious only after 2015. •The increase in social security benefits and burdens brings about temporary income growth driven by the consumption of elder households; however, in the long run, the economy shrinks reflecting lower labor participation of elders that is caused by the higher pension payments. JEL Classification : C50; E17; H55; J10 Key words : Econometric modeling; Simulation; Social Security; Demographic Economics

Pages: 84 pages
Date: 2004-10
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