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Long-term care insurance effects on Japan fs regional economy: an approach linking theoretical with empirical analysis

Ryoji Hasegawa and Masaya Yasuoka
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Ryoji Hasegawa: Fukuyama City University

No 209, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: Long-term care insurance plays an important role in Japan, where dual problems of an aging population and low birthrate have continued. Such insurance affects the macro-economy through many mechanisms, with both negative and positive influences. Although increased taxes and insurance premiums from long-term care decrease consumption, decreasing precautionary saving eventually increases consumption because of decreased risks of long-term care and mitigation of self-payment for people receiving long-term care services. Furthermore, effects on household consumption by the aging population and low birthrate are expected to differ among regional economies. This study, particularly addressing insurance effects on household consumption and the regional economy, develops a theoretical model for household consumption and assesses numerical examples of macroeconomic effects using parameters that are consistent with data for Japan. Furthermore, using a multi-regional input?output (MRIO) table at the prefectural level in Japan, we examine long-term care insurance effects on household consumption and economic ripple effects occurring regionally and nationally. The results reveal differences in insurance effects by region and by household generation. Gross Domestic Product (GDP), representing total economic activity, rises. Gross Regional Product (GRP) can also be pulled up. However, because of a difference in the degrees of increase in GRP in the respective regions, GRP inequality can be magnified. Specifically considering these results, we assess relations between regional economic disparities and improvements in long-term care insurance.

Keywords: Elderly care subsidy; Household consumption; Multi-regional Input?Output (MRIO) table; Precautionary saving (search for similar items in EconPapers)
JEL-codes: R15 E21 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2020-04
New Economics Papers: this item is included in nep-age, nep-ias and nep-mac
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