Current Institutional Affiliation
Professor, Faculty of Economics, Okayama University

Award Information

Abe Fellowship 2015
Institutional Affiliation (at time of award):
Professor, Faculty of Economics, Okayama University
Quantitative Analysis of Social Security Policies for Depopulating and Aging Societies

Japan's population is aging at a rapid rate, and will continue to do so at a speed that no other developed nation has experienced before. At the same time, the total population is decreasing, and will continue to decrease. The National Institute of Population and Social Security Research (2012) projects that, in 100 years' time, Japan's total population will be approximately one third of its present size. It is not difficult to imagine that such a dramatic structural change will seriously impact on socioeconomic systems in Japan. For this reason, securing a population sufficient to maintain socioeconomic systems. In 2014, the Japanese government set a goal to secure the population at approximately 100 million in 50 years' time. It is the first time in history that the government to express formally a concrete numerical target of the future population, reflecting the government's sense of impending crisis. Because policies such as child allowances only take effect a considerable number of years after initiation, there is no time to delay in implementing countermeasures for this pressing issue. Most advanced countries currently face impending problems resulting from falling birthrates and declining populations. For example, Japan's fertility rate is 1.42 (2014), Germany's 1.40 (2013), and South Korea's 1.21 (2014). Because of its one-child policy, China is certain to face serious problems relating to an aging population in the near future. Indeed, most developed countries face falling birthrates and depopulation. My research provides a useful and practical tool to analyze this important issue. Because I have successfully extended the Auerbach–Kotlikoff simulation model to incorporate endogenous fertility, the model is able to deal with this impending problem in a quantitative way, and to rigorously investigate the effects of various countermeasures. My proposed research addresses issues that are not only pressing in Japan, but also in most developed countries, making it both contemporary and transnational in nature. The main property of my research method is quantitative analysis (or simulation analysis), which has the following merits: by a theoretical (or qualitative) analysis, we can study whether equilibrium exists, and in which direction the changes in economic policies will shift this equilibrium. However, the analysis fails to give numerical rates and quantities in equilibrium. A quantitative analysis provides the degree (or percentage) by which different policies cause a change in the rates and quantities. Because my simulation model has been extended to incorporate endogenous fertility, the research method can answer pressing modern questions. Furthermore, my research takes account not only of the welfare of current generations, but also the welfare of future generations in the infinite future. Because my simulation model addresses the infinite future, the research can be used to evaluate alternative social security policy proposals from a long-run perspective. It can also be used to analyze the sustainability of tax or social security systems. If a particular tax or social security policy proposal is not sustainable in the long run, the simulation calculation simply stops. This means that my research method can not only quantify the effects of a proposed policy, but can also examine, simultaneously, whether the policy reform is sustainable from a long term perspective.