The Japanese economy has gone through important transitions during the postwar period such as the gradual slowdown in economic growth and the steady increase in the share of people aged above 65 years old among the adult population. In this paper we construct a parsimonious neoclassical growth model to quantitatively assess the impact of population aging and various government policies on output growth in Japan over the 1975-2015 period.
We consider several interactions between government policies and population aging. First, labor income tax has been rising steadily as the social security burden of the working age population has increased. Next, population aging tends to decrease employment and increase hours worked per worker in exchange; the workweek reduction policy introduced in the late 1980s is crucial to account for the decline in hours worked per worker during this period. Finally, the composition of fiscal spending has shifted from public investment to medical expenditure as the demand for health care services has risen.
The mechanisms through which monetary policy (MP) affects inflation and real economic activity are central to macroeconomics. During the past few decades, New Keynesian models have constituted the dominant view of that transmission mechanism. In those models, MP affects inflation and real economic activity through the effect of interest rate changes on firms' mark-ups over marginal costs of production. Changes in mark-ups have a redistributive effect between labour and profits. The essence of that mechanism in its simplest version is as follows: when prices cannot adjust immediately, a monetary policy contraction that reduces demand implies that prices are too high relative to optimal because firms cannot lower prices to adjust to the fall in demand; since prices are above optimal, firms are charging a higher mark-up after the contractionary MP surprise. Since mark-ups rise, the labour share of income falls and the profit share (mark-ups) increases. Thus, we would expect that, after a MP contraction, cyclically, the labour share would fall.
The School's Dr Katsuyuki Shibayama (Principal Investigator), Professor Miguel León-Ledesma, and Dr Keisuke Otsu (Keio University and Honorary Lecturer at Kent) have received funding from the Murata Foundation in Japan for 2 million Yen for a project entitled: A quantitative analysis of population ageing on economic growth and income inequality.
The project aims at understanding the consequences of population ageing for the joint dynamics of growth and income distribution. Its objective is to construct a model of overlapping generations where families choose the number of children and their level of education. The model will then be used to analyse the effect of different "anti-ageing" policies on growth and income distribution, namely: female employment support, child-care support, and higher education subsidies.
Dr Penélope Pacheco-López, Associate Lecturer in Economics, has made a major contribution to a recent UNIDO publication on Structural Change for Inclusive and Sustainable Industrial Development. She wrote three chapters "Manufacturing and Economic Development: An Introduction", "Patterns of Manufacturing Development" and "Inclusive Manufacturing Development". The publication is accessible at https://www.unido.org/resources/publications/latest-publications
The pay of university vice-chancellors (VC) in the UK has caused a strong debate in the press recently leading to some VCs having to resign.
Academics protest that at a difficult time for UK academia caused by the insecurity faced in the outset of Brexit, the gap between VC and staff pay is increasing. Students claim that at a time when tuition fees are increasing and they are accumulating high levels of debt the increase in VC's pay is unacceptable. Remuneration committees of universities however, argue that the increase is justified giving the VCs outstanding performance, especially during these turbulent times.