Policy uncertainty and cost of delaying reform: The case of aging Japan

Sagiri Kitao

研究成果: Article査読

30 被引用数 (Scopus)


Reform is inevitable in an aging economy with a generous pay-as-you-go social security system. Often, however, the timing and structure of reform are unknown. We explicitly model policy uncertainty in a general equilibrium life-cycle model and let agents update expectations and react as uncertainty is resolved over time. Using the case of Japan, a country facing severe demographic and fiscal challenges, we quantify welfare tradeoff across generations by delaying reform or reducing its scope. Individuals respond to a delay by dis-saving and working less, while facing higher taxes to cover additional expenditures during the transition. Fiscal uncertainty itself has a more significant adverse effect on older individuals, who face greater income risks and a lower return on their retirement savings.

ジャーナルReview of Economic Dynamics
出版ステータスPublished - 2018 1月

ASJC Scopus subject areas

  • 経済学、計量経済学


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