Within-Cohort Inequality and Tax Reforms in an Aging Japan

Abstract

This chapter takes account of within-cohort inequality that increases in a transition to an aging society. The simulation model employed in this chapter is basically the same as that in Chap. 7. This chapter demonstrates the general equilibrium effects of an increasing variance in the lifetime income distribution with an aging Japanese population. It also studies the macroeconomic and welfare effects of introducing progressive expenditure taxation in this situation.

An earlier version of this chapter was presented at the International Forum on Tax Reforms in Japan organized by the Economic and Social Research Institute (ESRI) at the Cabinet Office (Government of Japan) in September 2002 (Okamoto 2002). The author is grateful for insightful comments and suggestions by Professors Alan J. Auerbach (The University of California, Berkeley), Laurence J. Kotlikoff (Boston University), David E. Weinstein (Columbia University), Anil Kashyap (The University of Chicago), Koichi Hamada (Yale University), Toshihiro Ihori (The University of Tokyo), and Toshiyuki Uemura (Toyo University). The author acknowledges the financial support from the Ministry of Education, Culture, Sports, Science and Technology in Japan (Grant-in-Aid for Encouragement of Young Scientists No. 13730064).