Abstract
In Japan,“Long Term Care Insurance System”is expected to be implemented in the near future. This is because the Japanese society is aging rapidly. While some say that this rapid aging will reduce the rate of economic growth, others say that the growth rate of the overall economy will increase due to the growing health or welfare sector (long term care sector). These two kinds of arguments do not have definite foundations in economic theory. Hence this problem should be analyzed utilizing the framework of economic theory. In this paper, the foundamental framework for the economic analysis for the long term care problem in Japan is presented and discussed. I employ the two-sector overlapping generation model, which is largely based upon the results derived by Galor (1992).
I selected the two sector overlapping generation model for the following reasons. I want to discuss the effect on economic growth of the allocation of more resources to the long term care sector. Thus we must deal with this long term care sector as an independent industry, Therefore I employ-the“two-sector”model. Furthermore, I include into the analysis the fact that the younger generation often cares for the old in general by employing the overlapping generation model
This paper presents the model above and makes discussions on its steady state for the old in general by employing the overlapping generation model.
