Integration of Tax and Social Security Systems Financing Methods for a Public Pension Scheme in a Pay-as-you-go System

Abstract

The purpose of this chapter is to establish guidelines for structural reforms of tax and social security systems in an aging Japan. Using the simulation model employed in the earlier chapters, this chapter introduces a basic pension into the public pension system. The empirical aspect is intensified in this chapter; most of the parameter values are calibrated based on the data prepared by the Japan Cooperative Association. The chapter incorporates 275 representative households with unequal incomes, which are estimated using these data.

This chapter is based on published material, Okamoto and Tachibanaki (2002). An earlier version of this chapter was presented at the 53rd Congress of the International Institute of Public Finance (IIPF) at Ritsumeikan University, the 1997 Annual Meeting of the Japan Association of Economics and Econometrics at Waseda University, the International Conference on Social Security Reform in Advanced Countries at the University of Tokyo in 1999, and the 2000 Annual Meeting of the Japan Fiscal Science Association (Nihon Zaisei Gakkai) at Meikai University The author is grateful for insightful comments and suggestions by Professors Naosumi Atoda, Bev Dahlby, Yoshibumi Aso, Yukinobu Kitamura, Shigeki Kunieda, Masahiro Hidaka, Kyoji Hashimoto, Takao Fujimoto, and Shoji Haruna. The author acknowledges the financial support from The Zengin Foundation for Studies on Economics and Finance.