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Project Title

Recipient of Grant-in-Aid for Scientific Research (Specially Promoted Research) for the field of Humanities and Social Sciences, given by the Japan Society for the Promotion of Science (JSPS).

Full project title: "Construction of Policy-Evaluation-Oriented and Heterogeneity-Sensitive National Transfer Accounts and their Application to Policies for Coping with Declining Fertility and Population Aging"

Project Outline

Purpose and Background of the Research

The National Transfer Accounts (NTA) is a new tool for analyzing intergenerational income transfers in the conditions of rapid population aging, widely used by international organizations such as the World Bank, IMF, and the UN. It is an epoch making tool in that it captures both private and public average intergenerational income transfers at a point in time in an internationally comparable way. In the present research, we endeavor to expand the NTA so as to capture not only the average income, but also income heterogeneity (in relation to household composition, health status of household members, and socio-economic status), as well as income across the life cycle. In addition, we will create an NTA framework that can, beside income transfers, also capture intergenerational time transfers, in child-rearing or caring for the elderly parents, for example. We will also develop a framework that allows us to assess policy effects by taking into account household and firm responses to policy changes, and will use it to evaluate various policies regarding low fertility and aging.

Research Methods

The current NTA framework is a reduced form analysis, treating consumption and labor income as endogenous variables and age as an exogenous variable. We introduce structural models of households and firms in the NTA framework. The household structural model provides a framework for introducing heterogeneity in households, and at the same time provides a way to consider life-cycle income transfers and intergenerational time transfers. The firm structural model allows us to consider how firms substitute or complement workers with different age and how such companies react to government policies. These models are used to capture (private and public) intergenerational income and time transfers over the life cycle, and serve as a base for predicting how household and firms react to different government policies.

Expected Research Achievements andScientific Significance

In this project we will create a new NTA framework that captures how intergenerational income and time transfers vary across different types of households and examines how households and firms react to different government policies. That will enable us to properly evaluate policies, such as raising the pension eligibility age and encouraging firms to employ more women and the elderly. The new framework will also allow us to clearly examine life-time income distribution, instead of simple, cross-sectional distribution. We will also introduce age-dependent price index to reflect differences in consumption content across different age groups. The planned examination of time transfers in addition to income transfers is expected to shed new light on the factors that affect labor supply and female fertility. In addition, the new data sets, the “Japanese Study on Aging and Retirement” and the “National Survey on Work and Family” that are essential for the present research, will be made publically available and are expected to be widely used by other researchers.

Publications Relevant to the Project

Ichimura, H., H. Hashimoto, S. Shimizutani (2009) “JSTAR First Results: 2009 Report,” RIETI Discussion Paper Series 09-E-047.
Heckman, J., H. Ichimura, P. Todd (1998) “Matching as an Econometric Estimator,” Review of Economic Studies, 65, 261-294.

Term of Project

FY2015-2019

Homepage Address and Other Contact Information

Homepage: http://www.ichimura-lab.e.u-tokyo.ac.jp/

Project office (Ichimura Lab): ichimura_supp@e.u-tokyo.ac.jp

Project leader: ichimura@e.u-tokyo.ac.jp

Project Background

Population aging is a global trend and age structural shifts are causing disruptions both on societal and familial levels in both developed and developing countries. Population aging is especially rapid in Japan where the proportion of those 65 and over has reached 25% in 2013 and is projected to soar to 33% in 2035. In Japan issues related to aging have largely been addressed in terms of how to secure the necessary financial resources to support the social security system and no effective reform plans with serious considerations of incentives and diversity have been presented. A lack of comprehensive individual-level data has been a major hurdle for comprehending individual diversity in socioeconomic, health and familial conditions and for assessing policy effects on these individuals.

Our project aims to contribute to effective policy making and assessment in the fields of social security, labor market, education, health, and care for children and the elderly, by applying a new, expanded policy-oriented version of the National Transfer Accounts (NTA). Concretely, the NTA will be reinforced by a new policy simulation model utilizing data on the elderly and younger population cohorts collected by two major Japanese surveys: the Japanese Study on Aging and Retirement (JSTAR) and Nihon University’s Survey on Work and Family (NSWF). Moreover, the new, expanded NTA will also deal with estimations of labor demand by firms and deflators for each age group, and will thus make our simulations more realistic.

The NTA are a system that measures, at the aggregate level, how persons at each age acquire and use economic resources. They have been constructed in a manner consistent with the National Income and Product Accounts (NIPA). The NTA system contains two major components. The first is a detailed accounting of the economic lifecycle, consisting of consumption, labor income and their constituent elements. As people move through their lives, there are periods, such as childhood and old age, when their material needs are not matched by their ability to produce goods and services and they consume more than they produce, thus generating lifecycle deficits (LCD), while, on the other hand, during their prime working ages, they produce far more than they consume, generating lifecycle surpluses. The second component of NTA measures the flows of economic resources, both private and public, from lifecycle surplus to deficit ages. The NTA system offers a comprehensive and coherent treatment of economic flows (For further details, see: www.ntaccounts.org). NTA research commenced in 2003.

The Global NTA project is led by professors R. Lee from UC Berkeley and A. Mason from the University of Hawaii and encompasses 46 countries. The usefulness of NTA has been recognized by international organizations such as the UN, World Bank and the WHO. Recently the UN joined the efforts to disseminate the NTA methodology, viewed as a tool for tackling issues related to population aging and economic development that can be used by its member states in formulating their national development plans, by publishing the UN “National Transfer Accounts Manual: Measuring and Analyzing Generational Economy” in 2013.

However, currently the NTA system offers only macro indicators of labor income, consumption and their constituents broken by age, from which it is possible to calculate the average value for each of the variables for each age group. As such, NTA does not address disparity within the same age group that arises due to different health and work status, different family structure, place of residence, etc. Understanding such differences in individual responses to policy changes and the mechanisms underlying them is essential for formulating effective policies to cope with population aging, which is why there is a strong need to collect more information and expand NTA. That will be achieved by relying on the following two survey data sources which have a broad coverage:

(1) The Japanese Study on Aging and Retirement (JSTAR) is a longitudinal panel survey conducted on the population aged 50 to 75, intended for collecting large, representative samples of data on the income and expenditure, retirement plans and health of the middle-aged and elderly people. Despite rapid population aging, Japan has lagged behind other developed and even some developing countries in conducting such surveys, which is why the causes of Japan’s remarkably high life expectancy, late retirement and low ratio of medical expenses to GDP are not well understood. To fill this gap, the 1st round of JSTAR was conducted in 2007 by H. Ichimura, and S. Shimizutani, with the 2nd, and 3rd rounds following in 2009 and 2011, and the 4th round being currently implemented. JSTAR achieved a response rate of approximately 60%, thereby meeting international survey standards, and soon became an internationally recognized panel survey on middle-aged and elderly persons. Also, JSTAR is one of the subjects in RAND’s effort to harmonize questionnaires for international comparison. (For further details, visit: https://mmicdata.rand.org/megametadata).

Our research project will include two additional rounds of the JSTAR survey, the 5th round in 2015 and the 6th in 2017. When these are finished, a panel data set collected from the same subjects at regular intervals for over more than a decade will become available in a format that will render it usable by both domestic and foreign researchers.

(2) Nihon University’s National Survey on Work and Family (NSWF) is a nationwide survey conducted on the sample of around 9,000 individuals aged 20 to 59, which, along with personal information on age, family structure, occupation and income, collects data on the number of children, the ideal family size, attitudes towards work, marriage, sex, etc.

The survey offers valuable data on the financial support given by parents to their married children, living arrangements (co-residence with parents), the respondents’ notion of the ideal family size, women’s attitude to work and child rearing, reasons for having or not having children, etc.

Data collected by this survey, when incorporated into the NTA framework, will yield important insights into issues such as cost of children, women’s labor force participation (i.e., women’s decision making regarding the dilemma of whether to pursue a career or quit employment in order to raise children or care for their elderly parents). Furthermore, the NSWF will be replenished by highly comparable data from the National Survey on Family Planning by the Mainichi Newspapers, which was unique in that it had over five decades asked the question regarding the perceived value of providing nursing care to one’s aging parents. A sizeable number of the questions in the Mainichi survey will be incorporated in the NSWF questionnaire, thus enabling us to go back as far as the 1950s in our analyses.

Research Objectives

The main objective is to contribute to more effective policy making regarding population aging (specifically, pension and health systems, education, labor force participation, care for children and the elderly, etc.) This will be accomplished by collecting micro data that have been so far unavailable, by processing them in the new NTA framework and by running policy simulation exercises based on them. We shall substantially improve the NTA system by transforming it into a framework that enables policy assessment based on empirical micro data analyses in response the so-called Lucas critique, which finds macroeconometric predictions of policy effects unreliable. Indeed, the major shortcoming in the discussions of the social security system, fertility, labor participation etc. in Japan has been the inability to thoroughly introduce the microeconomic perspective. While macro indicators such as the average cost of children and elderly have been known, finer micro indicators such as the cost of children by family type, by parents’ educational background, place of residence or assets held, or the cost of retirement as a function of work experience and health status have not been well known.

However, for effective policy making, macro and micro analyses have to be integrated, and a useful tool for the integration is the new NTA framework incorporating extensive micro-level data collected by JSTAR and the NSWF. More specifically, our objective is to take into account the heterogeneity of the elderly population at the individual level and thus shed light on the causes of Japan’s remarkably high life expectancy, late retirement and low ratio of medical expenses to GDP that have not been well understood so far. Current projections of the financial future of Japan’s social security system do not adequately take this heterogeneity into account, especially as it affects incentive structures at the individual level, and this has been a major source of estimation errors.

Another specific objective is to further elucidate the issues of women’s labor participation, career development and decision making regarding child bearing at the microeconomic level.

Also, by analyzing the relationship between the cost of the elderly and the cost of children, and whether the so called “crowding-out effect” exists between them, we shall shed light on how limited public and private resources have been and will be allocated in the future, and thus contribute to a more efficient management of these resources through more effective policy recommendation.

Furthermore, the consequences of population aging are diverse, stemming from the interplay between health, economic, social, psychological, biological, and environmental factors. In Japan there would be no large-scale longitudinal data sets to capture all these various aspects of life if it were not for JSTAR. One of our specific goals is, therefore, achieving a nationally representative sample both by expanding JSTAR’s current geographic coverage, and by refining our calculation of sample weights for JSTAR by utilizing population census data to which we will be given access to by the Statistics Bureau of the Ministry of Internal Affairs and Communications.

We also aim to improve the NSWF by making it a longitudinal survey in the next two rounds, scheduled for 2016 and 2018, which will enable us to conduct further policy simulations regarding the young and middle-aged.

Importance of the Project

The greatest importance of our project lies in the fact that thanks to its tripartite structure, consisting of the new NTA framework expanded by detailed information from the two major surveys collecting a wealth of data on socioeconomic indicators, attitudinal variables, and health of a broad spectrum of the Japanese population, it can provide a realistic and comprehensive picture necessary for understanding both macro and micro trends in fertility, child rearing, education, health, labor force participation by the elderly and women, as well as for policy making regarding these issues. Our research especially fulfills the need for elucidating the microeconomic aspects of social security, child rearing, female and elderly labor force participation, etc., and can, thus, improve our understanding of factors affecting retirement-related behavior of the elderly, decisions on fertility and work termination by women, the demand for medical services and care-giving, etc. A thorough understanding of these factors is indispensable for effective and efficient policy planning, but, largely because of the paucity of relevant micro data, there has been little empirical research on them in Japan, and no effective policies have been formulated to this day.

Related to 1, our project will serve not only to refine the NTA system but also to expand it so that more reliable policy evaluations can be conducted. The system, although a highly useful methodological tool for capturing the effects of changes in the size and structure of population on society and economy, at present cannot capture gender and individual differences and is weak in terms of carrying out simulations that are important for effective policy making.

The US National Academy of Sciences has recently recommended that NTA-related research be linked with longitudinal demographic surveys on the elderly that offer a wealth of micro-level data, such as the US Health and Retirement Survey (HRS). JSTAR is a sister survey of the HRS, and our plans to utilize the JSTAR data for expanding the NTA will, likely, make Japan the first country among the 20 member states of the global NTA project who possess an HRS-type of survey to achieve that goal.

Furthermore, projects intended to collect large-scale, representative data sets on middle-aged and elderly persons have commenced in a number of countries and regions, such as the US, the UK, continental Europe, Mexico, South Korea, China, and India. The JSTAR component of our proposed project is, therefore, significant in that it will help Japan, which still lacks a nationally representative survey of the elderly, close this gap.

Project Members

Principal Investigator:

Hidehiko Ichimura

Professor, University of Tokyo, Graduate School of Economics

E-mail: ichimura@e.u-tokyo.ac.jp

Co-investigators:

Emiko Usui

Professor, Hitotsubashi University, Institute of Economic Research

E-mail: usui@ier.hit-u.ac.jp

Tsunao Okumura

Professor, Yokohama National University, Graduate School of International Social Sciences

E-mail: okumura@ynu.ac.jp

Daiji Kawaguchi

Professor, Tokyo University, Graduate School of Economics

E-mail: kawaguchi@e.u-tokyo.ac.jp

Sagiri Kitao

Professor, Tokyo University, Graduate School of Economics

E-mail: skitao@e.u-tokyo.ac.jp

Satoshi Shimizutani

Research Fellow, Nakasone Yasuhiro Peace Institute, Research Department

E-mail: sshimizutani@gmail.com

Rikiya Matsukura

Associate Professor, Nihon University, College of Economics

E-mail: matsukura.rikiya@nihon-u.ac.jp

Shintaro Yamaguchi

Professor, University of Tokyo, Graduate School of Economics

Tomoaki Yamada

Professor, Meiji University, School of Commerce

E-mail: tyamada@meiji.ac.jp

Yasuyuki Sawada

Professor, University of Tokyo, Graduate School of Economics

E-mail: sawada@e.u-tokyo.ac.jp

Tsutomu Watanabe

Professor, University of Tokyo, Graduate School of Economics

E-mail: watanabe@e.u-tokyo.ac.jp

Research collaborators:

Tatsuro Ishizaki

Team Leader, Tokyo Metropolitan Institute of Gerontology

Yasuhiro Omori

Professor, University of Tokyo, Graduate School of Economics

Hideo Owan

Professor, Waseda University, Faculty of Political Science and Economics

Takashi Oshio

Professor, Hitotsubashi University, Institute of Economic Research

Kengo Kato

Associate Professor, University of Tokyo, Graduate School of Economics

Katsunori Kondo

Professor, Chiba University, Center for Preventive Medical Science

Naoki Kondo

Associate Professor, University of Tokyo, Graduate School of Medicine

Katsumi Shimotsu

Professor, University of Tokyo, Graduate School of Economics

Michio Suzuki

Associate Professor, Tohoku University, Graduate School of Economics

Ryuichi Tanaka

Professor, University of Tokyo, Institute of Social Science

Ryo Nakajima

Professor, Keio University, Department of Economics

Daigo Nakata

Associate Professor, Faculty of Economics, Soka University

Haruko Noguchi

Professor, Waseda University, School of Political Science and Economics

Hideki Hashimoto

Professor, University of Tokyo, Graduate School of Medicine

Hiroyuki Yamada

Professor, Keio University, Department of Economics

Michal Fabinger

Lecturer, University of Tokyo, Graduate School of Economics

Andrew Griffen

Associate Professor, University of Tokyo, Graduate School of Economics

Sim Seung-Gyu

Associate Professor, Aoyama Gakuin University, School of International Politics, Economics and Communication

Hitoshi Matsushima

Professor, University of Tokyo, Graduate School of Economics

Kota Watanabe

Project Researcher, University of Tokyo, Graduate School of Economics

Shinya Sugawara

Lecturer, Tokyo University of Science, School of Management

Kenichi Ueda

Associate Professor, University of Tokyo, Graduate School of Economics

Project professor:

Naohiro Ogawa

Project Professor, University of Tokyo, Graduate School of Economics

E-mail: ogawa-naohiro@e.u-tokyo.ac.jp