Yamada Tomoaki    Department   Undergraduate School  , School of Commerce    Position   Professor
Language	English
Publication Date	2011/09
Type	Academic Journal
Peer Review	Peer reviewed
Title	A Politically Feasible Social Security Reform with a Two-tier Structure
Contribution Type	Sole-authored
Journal	Journal of the Japanese and International Economies
Volume, Issue, Page	25(3),pp.199-224
Details	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.
DOI	10.1016/j.jjie.2011.07.002