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

Author

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  • Masaya Yasuoka

    (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.

Suggested Citation

  • Masaya Yasuoka, 2013. "Subsidies for Elderly Care in Pay-As-You-Go Pension," Discussion Paper Series 109, School of Economics, Kwansei Gakuin University, revised Sep 2013.
    • Handle: RePEc:kgu:wpaper:109
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp109.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Masaya Shintani & Masaya Yasuoka, 2019. "Fertility and Labor Share of Child Care Service," Discussion Paper Series 194, School of Economics, Kwansei Gakuin University.

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    More about this item

    Keywords

    Aging society; Elderly care service; Pay-as-you-go pension;
    All these keywords.

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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