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Intergenerational Implications of Fiscal Consolidation in Japan

Author

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  • Kiichi Tokuoka
Abstract
In Japan, intergenerational inequality in lifetime resources is substantial, with a heavier fiscal burden on the young than the old. Moreover, given the need for fiscal consolidation, the inequality is even worse than existing policy would suggest. However, this does not mean that fiscal consolidation would make the young worse off. Lack of fiscal consolidation would eventually increase interest rates, which would reduce output and hit young generations harder. Simulations using an overlapping generations model indicate that, from the perspective of intergenerational fairness, it would be desirable to include both social security spending reforms and revenue measures in a fiscal consolidation package. The simulations also show that delaying fiscal consolidation could be costly and worsen intergenerational resource inequality.

Suggested Citation

  • Kiichi Tokuoka, 2012. "Intergenerational Implications of Fiscal Consolidation in Japan," IMF Working Papers 2012/197, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/197
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    References listed on IDEAS

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    3. Kenichiro Kashiwase & Mr. Masahiro Nozaki & Kiichi Tokuoka, 2012. "Pension Reforms in Japan," IMF Working Papers 2012/285, International Monetary Fund.
    4. Heller, Peter S., 2016. "The challenge of an aged and shrinking population: Lessons to be drawn from Japan’s experience," The Journal of the Economics of Ageing, Elsevier, vol. 8(C), pages 85-93.
    5. Heller, Peter S., 2015. "The Challenge of an Aged Population: Lessons to be drawn from Japan's Experience," CIS Discussion paper series 651, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
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    8. Tanweer Akram & Huiqing Li, 2016. "The Empirics of Long-Term US Interest Rates," Economics Working Paper Archive wp_863, Levy Economics Institute.
    9. Akram, Tanweer & Li, Huiqing, 2017. "What keeps long-term U.S. interest rates so low?," Economic Modelling, Elsevier, vol. 60(C), pages 380-390.
    10. Tanweer Akram & Anupam Das, 2015. "Does Keynesian Theory Explain Indian Government Bond Yields?," Economics Working Paper Archive wp_834, Levy Economics Institute.
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    12. Anupam Das & Tanweer Akram, 2020. "A Keynesian analysis of Canadian government securities yields," PSL Quarterly Review, Economia civile, vol. 73(294), pages 241-260.

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