GRIPS 政策研究センター Policy Research Center


2016/4/1 ~ 2018/3/31

Macroeconomics of Health, and Mandatory Retirement in Japan


1) Short term project (1 year): Macroeconomics of Health. In recent years there are more macroeconomists interested in the implication of health and medical expenses risk at an aggregate level, eg. aggregate labor supply/medical expenses, health insurance coverage for working age and elderly groups. I and the two research collaborators have been working on this new area for many years. One of the collaborators, Mariacristina De Nardi, is invited to write a reviews of literature in this area for publishing in Journal of Economic Literature (JEL). The journal is published by American Economic Association (AEA). And the papers published in the journal are peer-reviewed and their submission is by invitation only.


2) Long term project (2 years): Mandatory Retirement in Japan (and its implication on Social Security Reform). A unique practice in the Japanese labor market is its mandatory retirement. A person’s lifetime employment contract is usually ended at a certain age, current at 60. For those who continue working, they usually move into non-regular jobs even though they work with the same employers. This creates a disruption in employment in terms of wages and job security. 


In this project, we try to understand the effect of the mandatory retirement on the labor force participation among male Japanese and its implication on the Employee Pension reform. Our preliminary findings (Figure 1) show that there is a sharp drop in their labor market participation at age 60. The challenge is to isolate the effect of mandatory retirement from the effect of the Employee Pension since the normal pensionable age among those who were retired before 2013 is also at age 60. We plan to use a structural model in the studies.
Under the current scheme, the normal pensionable age of Employee Pension among people born after 1953 will gradually move up to age 65. If the mandatory retirement significantly affects the labor market participation, raising the pensionable age can have a large negative impact among these cohorts due to the income loss between the mandatory retirement age and their normal pensionable age. So this research will also provide a deeper insight related to the social security reform in Japan.