TABLE OF CONTENTS
Preface
Introduction - David A. Wise
DOI: 10.7208/chicago/9780226620831.003.0001
[aging, saving, wealth, asset allocation, health care, incentives, early retirement]
The Japan Center for Economic Research and the National Bureau of Economic Research have been engaged in joint projects on the economics of aging and related areas for several years. Two prior conference volumes reporting the results of these studies have been published: Aging in the United States and Japan in 1994, and The Economic Effects of Aging in the United States and Japan in 1997. This volume contains text that was presented in Kyoto, Japan, in May 1997. The contributions are focused on four topics: saving, wealth, and asset allocation over the life cycle; health care and health care reform; incentives for early retirement, as well as labor market incentives over the working life; and population projections. This introductory chapter presents an overview of these contributions. (pages 1 - 24)
This chapter is available at:
https://academic.oup.com/chica...
Choice, Chance, and Wealth Dispersion at Retirement - Steven F. Venti, David A. Wise
DOI: 10.7208/chicago/9780226620831.003.0002
[lifetime earnings, wealth accumulation, investment choice, asset accumulation, retirement savings, saving behavior]
In a previous study, the authors of this chapter evaluated the extent to which the different wealth accumulation of households with similar lifetime earnings could be accounted for by random shocks, such as health status and inheritances, that could reduce or increase the available resources out of which saving could be drawn. They concluded that only a small fraction of the dispersion in wealth accumulation within lifetime earnings deciles could be accounted for by random shocks, and thus that most of the dispersion could be attributed to choice; some people save while young, others do not. This chapter continues that analysis but with two additions: first, it evaluates the effect of investment choice on the accumulation of assets — in particular, how much of the dispersion in wealth can be accounted for by the choice between investment in the stock market and investment in presumably less risky assets such as bonds or bank saving accounts. Second, it attempts to understand the relationship between asset accumulation and individuals' assessment, just prior to retirement, of the adequacy of their saving and their saving behavior. The results indicate that the bulk of the dispersion in wealth at retirement results from the choice of some families to save while other similarly situated families choose to spend. For the most part, controlling for lifetime earnings, persons with little saving on the eve of retirement have simply chosen to save less and spend more over their lifetimes. Families with modest lifetime earnings would have accumulated substantial wealth had they saved consistently and invested prudently over the course of their working lives. (pages 25 - 64)
This chapter is available at:
https://academic.oup.com/chica...
Household Portfolio Allocation over the Life Cycle - James M. Poterba, Andrew A. Samwick
DOI: 10.7208/chicago/9780226620831.003.0003
[household asset allocation, portfolio behavior, retirement savings, Surveys of Consumer Finances, saving behavior, investment choice]
This chapter presents systematic empirical evidence on the basic patterns of household asset allocation over the life cycle. This information can help to evaluate competing models of household portfolio behavior, and more generally to assess proposals for greater reliance on household choices in retirement preparation. Using multiple waves of the Surveys of Consumer Finances, it controls for systematic differences across birth cohorts in the age-specific pattern of asset ownership. The chapter is organized as follows. Section 2.1 describes the Surveys of Consumer Finances and presents summary statistics for each wave of data. Section 2.2 presents the econometric methodology for distinguishing age and cohort effects and analyzes the patterns of ownership and allocation of financial assets. Section 2.3 places the analysis of financial assets within the context of households' comprehensive balance sheets. The final section discusses several implications of the results, as well as directions for further research. (pages 65 - 104)
This chapter is available at:
https://academic.oup.com/chica...
The Social Security System and the Demand for Personal Annuity and Life Insurance - Seki Asano
DOI: 10.7208/chicago/9780226620831.003.0004
[household asset allocation, public pension benefits, Japanese households, life insurance, private annuity, social security, retirement income]
This chapter examines the effects of public pension benefits on Japanese households' choice of life insurance versus private annuity. Two waves of microdata, constituting the Nikkei Radar Survey (RADAR) and obtained in 1990 and 1994, provide a unique opportunity to observe the effects of changes in social security benefits, total asset values, and expectations on households' asset allocations. The intended level of total annuities increased by about 4 million yen on average from 1990 to 1994, which more than compensated for a reduction in public pension benefits. Furthermore, the age profile for mean total annuities became flatter from 1990 to 1994 across all age groups because of the younger generation's early accumulation of personal annuities. In contrast to total annuities, the mean total of life insurance stayed quite flat and stable in both periods across age groups, while intragenerational variations widened to as much as twice their 1990 levels. One hypothesis to explain this result is that households have a minimum target level of annuity and bequest. Facing declining benefits from public pensions and unfavorable future income prospects, individuals begin to accumulate personal annuities at earlier stages of their lives. (pages 105 - 134)
This chapter is available at:
https://academic.oup.com/chica...
An Empirical Investigation of Intergenerational Consumption Distribution - Makoto Saito
DOI: 10.7208/chicago/9780226620831.003.0005
[economic growth, consumption goods, elderly consumers, young consumers, lifetime income]
This chapter empirically analyzes how the results of successful economic growth have been distributed among generations during the past thirty years in Japan, the United States, and the United Kingdom. The first half of the chapter looks at how the cross-sectional distribution of consumption goods between elderly and young consumers has evolved over time. Using age-classified consumption data, it shows that in both Japan and the United States, the percentage of youth consumption has declined substantially on a per capita basis while elderly consumption has increased dramatically. By contrast, young consumers in the United Kingdom are receiving an increasingly greater percentage of consumption goods. The second half of the chapter presents an analytical framework for evaluating quantitatively the evolution of the cross-age distribution of consumption goods. Applying this method to the age-classified data, it is shown that the value of the lifetime income peaked for the cohort born between 1932 and 1936 in Japan and for the American cohort born between 1947 and 1951. In both countries, lifetime income has declined among younger cohorts. This deterioration in lifetime income is more serious in the United States than in Japan, however. By contrast, the value of lifetime income is higher for younger cohorts in the United Kingdom. (pages 135 - 168)
This chapter is available at:
https://academic.oup.com/chica...
The Third Wave in Health Care Reform - David M. Cutler
DOI: 10.7208/chicago/9780226620831.003.0006
[OECD, medical systems, health care services, competition, cost sharing]
This chapter documents the trends in the Organization for Economic Cooperation and Development (OECD) medical systems over the past fifty years and the reasons for major changes in these systems. The world's medical systems have been in flux for most of the past fifty years. At first, countries built up their medical care systems. Coverage was made universal, and benefits were generous. There was little demand- or supply-side cost sharing. In the early 1980s, countries realized the unaffordability of generous demand incentives with no control over medical care supply. The typical response was to limit the supply side of the market by capping the total amount of services that could be provided. However, the strains in this approach ultimately became apparent. Excess demand led to waiting lists, non-pricing rationing, and the incentive to seek services outside the public sector. As a result, efficiency concerns rose in importance during the 1980s and 1990s. A focus on efficiency is likely to involve two reforms, which are characterized as the “third wave” of health care reform: increased competition for services, either at the level of the provider or at the level of the insurer; and increased patient cost sharing. (pages 169 - 186)
This chapter is available at:
https://academic.oup.com/chica...
Concentration and Persistence of Health Care Costs for the Aged - Seiritsu Ogura, Reiko Suzuki
DOI: 10.7208/chicago/9780226620831.003.0007
[health care expenditures, cost distribution, health care facilities, Japan, long-term hospitalization, nursing homes]
This chapter describes the distribution of health care expenditures among the elderly in Japan. It examines both regional and interpersonal variations in the hope of finding what determines each. It first outlines the distribution of health care costs among the elderly population, and singles out the factors that characterize the high-cost elderly. It then focuses on the high-cost elderly as represented by long-term inpatients and looks into the effect that long-term hospitalization has on the regional variation in health care costs. Long-term hospitalization or care-oriented services explain the major part (over 80 percent) of high-cost elderly patients in the health care system in Japan, rather than any unforeseeable phenomena such as accidents, fatal diseases, or serious surgical operations. The health care costs associated with long-term hospitalization account for one-third of the total cost of health care for the elderly. There are more long-term hospitalizations in areas in which there are large numbers of beds in health care facilities, as well as in areas where the capacity of special nursing homes, which are formal long-term care service providers for the elderly, is large. This leads to the conclusion that a care-service provision system, which combines health care facilities and special nursing homes for the elderly, exists in areas where there is a large demand for long-term hospitalization. (pages 187 - 222)
This chapter is available at:
https://academic.oup.com/chica...
The Effects of Demographic Change on Health and Medical Expenditures - Satoshi Nakanishi, Noriyoshi Nakayama
DOI: 10.7208/chicago/9780226620831.003.0008
[aging population, Japanese, health care costs, medical care costs, licensing systems, self-payment, health status]
This chapter analyzes the impact of the aging Japanese population on the health sector and on the economy as a whole. It focuses on (a) the effect of population aging on future medical care costs; (b) the effect of cost containment strategies on medical care expenditures; and (c) the extent to which licensing systems can or should be used to control the flow of new entrants into the medical profession. A simulation shows that maintaining the present system of payment for health care as the population ages will result in medical care expenditures growing at an average annual rate of 4.3 percent between 1991 and 2040. The share of medical expenditure in GDP will reach 10.8 percent in 2015, before gradually starting to decline. Moreover, even though people invest in their futures rather than their present medical care, their health status in the twenty-first century will be lower because of population aging. Controlling medical expenditures through cost containment will require the Japanese people to accept both major increases in the rate of self-payment for medical care and a decline in national health status. (pages 223 - 248)
This chapter is available at:
https://academic.oup.com/chica...
Choice among Employer-Provided Insurance Plans - Matthew J. Eichner
DOI: 10.7208/chicago/9780226620831.003.0009
[health insurance, employees, insurance claims, insurance costs]
This chapter describes the choices made by employees of a firm that offers three different insurance options, which differ both in their generosity and their costs to the employee. Section 8.1 describes the claims data used in this analysis. Section 8.2 examines the options elected by employees when their firms shifted from offering what was essentially a single plan to the menu of three plans. Section 8.3 considers the relative prices of the different coverage options. Section 8.4 focuses on the apparent willingness of employees to bear greater risk in return for paying less for insurance. Section 8.5 describes the group of those employees who, after selecting initial coverage options, reconsider their choices and transfer into other plans while Section 8.6 draws conclusions. (pages 249 - 272)
This chapter is available at:
https://academic.oup.com/chica...
Employees' Pension Benefits and the Labor Supply of Older Japanese Workers, 1980s–1990s - Yukiko Abe
DOI: 10.7208/chicago/9780226620831.003.0010
[aging population, pension system, labor market, social security benefits, Employee Pension insurance]
The Japanese government has instituted several modifications to the pension system to cope with the country's rapidly aging population. For example, whereas full social security benefits used to start at age sixty for men covered by the Employees' Pension program, reductions in benefits to be phased in between 2001 and 2013 mean that men aged sixty to sixty-four and covered by Employee Pension insurance (EP) will receive smaller pensions. Such reductions, as well as other changes in social security benefits and taxes, are likely to affect the number of older persons active in the labor market during the next few decades. This chapter is organized as follows. Section 9.2 presents an overview of the trend in the labor supply of Japanese men aged sixty to sixty-four. Section 9.3 explains the EP benefit rule for active workers and reviews its history from the 1980s to the present. Section 9.4 discusses the Survey on Employment Conditions of Older Persons (SECOP), which is the data set used in this chapter. Section 9.5 explains the descriptive statistics of work-mode choice and hours. Section 9.6 presents estimates from a reduced-form analysis. The chapter concludes with a discussion of the policy implications of the findings. (pages 273 - 306)
This chapter is available at:
https://academic.oup.com/chica...
The Motivations for Business Retirement Policies - Richard Woodbury
DOI: 10.7208/chicago/9780226620831.003.0011
[pension plans, early retirement, business retirement policies]
This chapter examines the motivations of firms in designing pension plans, and why these motivations have resulted in plans that have the effect of encouraging early retirement. The study is based on the experience of twenty large U.S. corporations. In particular, the analysis draws on a series of discussions about policy history and objectives with executives at each company, and a review of internal business documents relating to the design of the policies. The analysis identifies a number of objectives and motivations for the design of business retirement policies, including, in some cases, the desire for older workers to retire. In most cases, however, retirement incentives were either unintentional or secondary to the policy's central motivation. In general, the companies were much more concerned with providing competitive retirement policies (policies similar in structure and in value to those of their competitors in the labor market), and policies that adequately provided for the well-being of their retirees. (pages 307 - 334)
This chapter is available at:
https://academic.oup.com/chica...
Promotion, Incentives, and Wages - Toshiaki Tachibanaki, Tetsuya Maruyama
DOI: 10.7208/chicago/9780226620831.003.0012
[Japanese firms, careers, wages, job tenure, incentives, performance, employee promotion]
This chapter examines the relationships between promotion, effort incentive, and wages for white-collar workers in several large Japanese firms. The following results were obtained. First, employee position on the hierarchical ladder is crucial to understanding the relationship between promotion, effort incentive, and wages. The effect of wages on effort is important for employees early in their careers or before being promoted. The higher the wage payment, the higher the effort from these employees. For employees in mid-career, the crucial variable that increases effort is promotion prospective as measured by, for example, better performance in business. Next, effort can be increased only for employees who are early in their careers, or are lower on the hierarchical ladder. Age and job tenure are also effective for determining both promotion possibility and wages. Finally, what determines promotion, or how employees are promoted, differs according to the position. In other words, the decision-making variables are different for promotion to department head versus promotion to director. (pages 335 - 360)
This chapter is available at:
https://academic.oup.com/chica...
What Went Wrong with the 1991–92 Official Population Projection of Japan? - Seiritsu Ogura
DOI: 10.7208/chicago/9780226620831.003.0013
[government demographers, Japanese government, demographic model, marital behavior, fertility, marriage, birth]
This chapter shows that Japanese government demographers failed in their 1991–92 population projection due to a fundamental flaw in their methodology. In fact, if the same methodology is applied to the 1997 projection, there is hardly any need to change their 1991–92 projection. Thus, their methodologically “correct” projection will continue to diverge from reality for another five years, when they are scheduled for another projection. The chapter is organized as follows. Section 12.2 describes the formal demographic model used in the 1991–92 projection and presents the author's own estimates using new data made available since 1992. Section 12.3 formulates a marriage/birth model and explores the possibility of misspecification as a source of the government model's sensitivity to truncation. Section 12.4 formulates the age distribution of marital fertility rates and reports estimation results. Section 12.5 looks at significant changes in the marital behavior of Japanese women that took place in the last twenty years. Section 12.6 analyzes the causes of the decline in the fertility rates observed among three different cohorts almost five years apart, while Section 12.7 provides concluding remarks. (pages 361 - 402)
This chapter is available at:
https://academic.oup.com/chica...
Contributors
Author Index
Subject Index
