A politically feasible social security reform with a two-tier structureJournal of the Japanese and International Economies, 2011, vol. 25, issue 3, 199-224 Abstract: This paper investigates the welfare implications and political feasibility of social security reforms with a two-tier structure in Japan. We evaluate social security reforms from two points of view: (i) the ex-ante expected value of future generations, and (ii) whether current generations prefer reform to the status-quo system, which we call political feasibility. To evaluate the reforms, we use a large-scale overlapping generations model with idiosyncratic income risk and a two-tier structure. The first tier guarantees a basic pension and the second tier consists of the earnings-related part. Calibrating the parameters of the model to the Japanese economy, we compute the transition path and the two welfare criteria. We find that, given the two-tier structure in Japan, an increase in the basic pension and the abolition of the earnings-related part of the social security system improve the welfare of future generations, and ensures political feasibility when a consumption tax is the source of revenue. Keywords: Social; security; reform; Political; feasibility; Consumption; tax; Capital; income; tax; Aging (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:25:y:2011:i:3:p:199-224 Access Statistics for this article Journal of the Japanese and International Economies is currently edited by Takeo Hoshi More articles in Journal of the Japanese and International Economies from Elsevier |
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