Subsidies for Elderly Care in Pay-As-You-Go Pension

Masaya Yasuoka

No 109, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: In economically developed countries, aging of the population with fewer children is progressing. Social security benefits such as pensions and elderly care are increasing. In a society with fewer children, it is difficult for a government to provide sufficient pension benefits for older people if pay-as-you-go pensions are adopted because a decrease in the working population reduces tax revenues to provide pension benefits. Therefore, the pension contribution rate must be increased to provide sufficient pension benefits. This paper demonstrates that an increase in the pension contribution rate can not always raise pension benefits. However, if a government provides a subsidy for elderly care services and if aggregate demand for elderly care services increases, then the pension benefit can always increase because younger people purchase elderly care services and increase the labor supply instead of performing elderly care with their time. Moreover, this paper presents an examination of whether a subsidy for elderly care can raise the level of social welfare or not and shows that the subsidy can raise the social welfare level thanks to an increase in pension benefits.

Keywords: Aging society; Elderly care service; Pay-as-you-go pension (search for similar items in EconPapers)
JEL-codes: H51 H55 J14 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013-09, Revised 2013-09
New Economics Papers: this item is included in nep-age and nep-dem
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:109

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