This paper describes the basic analytical framework of the bunching estimation method, which has been increasingly applied in recent years, especially in the fields of public finance and public economics. Bunching estimation was first established by Saez (2010) as a method for estimating the elasticity of taxable income, but in recent years its applications have spread to other fields. With the expansion of applications, many papers have been published on the extension of analysis and problems in estimation of the method.

　In this paper, I (1) describe the basic analytical framework, especially in the context of taxable income elasticity, and (2) introduce the recent development of the method and the problems and issues in estimation that have been pointed out in subsequent studies.

　As research in the field of taxation and social security increasingly uses household microdata, an increasing number of studies are dealing with a technique known as microsimulation. This method estimates the amount of taxes and benefits by applying the actual system to information on household family structure and income, and plays a variety of roles, including (1) estimation of policy changes, (2) calculation of marginal tax rates, (3) complementing of samples, (4) resolution of seasonality problems, and (5) extraction of contributions from system changes. This paper first summarizes the development of microsimulation and research results on personal income taxation in Japan. We also use a microsimulation model based on household microdata (1989-2019) to clarify the actual situation regarding the burden structure of personal income taxation in Japan while taking advantage of the diversity of this method.

　This paper presents a survey of research utilizing insights from behavioral economics in the economic analysis of taxation and benefits and discusses Japan’s taxation and benefits policies from the viewpoint of behavioral economics. Behavioral economics is a collective term that is applied to research based on models in which the agent behaves under assumptions that differ from the “standard assumptions.” In recent years, there has been a sudden upsurge in research, even in theoretical analysis and empirical research on taxation and benefits. Specifically, studies are being conducted on topics such as tax-related inattention, the impact of taxation and benefits complexity, institutional design of retirement savings and pensions, promotion of tax payment, and the effects of benefits on labor, education and medical care. From the theoretical aspect, researchers are studying its relationship with optimal taxation. Knowledge of behavioral economics offers a new perspective to evaluate systems and policies related to taxation and benefits in Japan and has the potential to propose institutional design that is based on a more realistic image of humankind.

　While the current corporate tax system in Japan allows interest expense on debt to be deductible, no such mechanism exists for other financing, leading to a “debt bias.” Therefore, the Comprehensive Business Income Tax (CBIT), Allowance for Corporate Equity (ACE), and Allowance for Corporate Capital (ACC) have been proposed. According to international comparisons by the OECD, the marginal effective tax rates in ACE-adopting countries are low, and these countries have reformed their corporate tax systems toward financing neutrality.

　This study conducts a comprehensive survey of empirical analyses of Japan’s effective corporate tax rates and classifies them into four effective corporate tax rates. Further, fundamental corporate tax reform proposals using forward-looking effective tax rates are analyzed in line with Hanappi (2018), OECD (2020), and Spengel et al. (2020), who conducted international comparative studies of effective corporate tax rates. This study makes improvements to Japan’s 2020 parameters in Spengel et al. (2020) to obtain the cost of capital (user cost of capital), marginal effective tax rate, and average effective tax rate values by financing and assets. The parameters of the proposed reforms are then incorporated into a model of the effective corporate tax rate to conduct a simulation analysis under a constant statutory tax rate.

　First, a simple CBIT that does not allow deductions of interest expenses increases the cost of capital, marginal effective tax rate, and average effective tax rate for debt financing. Second, a simple ACE that allows the deduction of opportunity cost at the notional interest rate on equity lowers the cost of capital, the marginal effective tax rate, and the average effective tax rate for retained earnings and new equity. Third, a simple ACC that allows all financing to deduct opportunity costs at the notional interest rate lowers the cost of capital, marginal effective tax rate, and the average effective tax rate for all financing.

　However, these results are difficult to compare due to different average effective tax rates. Therefore, conducting similar simulations under a constant average effective tax rate results in statutory tax rates of 25.57% for CBIT, 42.33% for ACE, and 42.62% for ACC, compared with 31.30% for the base case. Thus, CBIT reduces its tax rate by five percentage points from the current rate, but ACE/ACC requires a ten percentage point increase. It is also indicated that CBIT increases the cost of capital and the marginal effective tax rate while ACE/ACC reduces these rates.

　The above simulations are conducted assuming a simple CBIT with no deductible interest expense, a simple ACE/ACC where the notional interest rate matches the nominal interest rate, and the rate at which ACE/ACC is applied matches the statutory corporate income tax rate. Simulations that relax these conditions are conducted under a constant average effective tax rate.

　First, under CBIT, varying the deductibility of interest expenses has a limited effect on the cost of capital and the marginal effective tax rate. Second, when the notional interest rate is set lower than the nominal interest rate or when the tax rate to which ACE/ACC is applied is set lower than the statutory tax rate, the effect on the marginal effective tax rate is significant.

　These results have some implications: CBIT can ensure financing neutrality, but it increases the cost of capital and the marginal effective tax rate, which may negatively affect investment. On the contrary, ACE/ACC decreases the cost of capital and marginal effective tax rate, which can positively affect investment. In particular, the ACE has been introduced in many countries and is considered a promising proposal for future corporate tax reform in Japan.

　Since 1961, the Japanese public healthcare system based on the universal health insurance system has contributed to raising the level of health and life expectancy of the Japanese people through improving the equity in access to healthcare and the quantity and quality of healthcare services. On the other hand, the national medical care expenditure, a consideration for this contribution, has been increasing steadily. The level of patient cost sharing in the health insurance system contributes to the efficiency and sustainability of the system, but it also has an impact on the healthy and cultured life for the Japanese people as well as the state of public health policies. This paper summarizes the economic studies using Japanese data that examine the effects of patient cost sharing on healthcare utilization and health. In addition, I use individual panel data with rich individual attributes and conduct empirical exercises to confirm the robustness of the effect of the sharp reduction of the coinsurance rate from 30 percent to 10 percent at age 70 in Japan. Including my empirical results, the price elasticity with respect to healthcare is generally low and changes in patient cost sharing generally do not have a large impact on health.

　This study examines the employment and earnings of public assistance recipients in Japan, utilizing household-level data from the Survey on Public Assistance Recipients complied by the Ministry of Health, Labour and Welfare. First, we provide basic descriptive statistics on the employment of the recipients and analyze the factors that influence their decision to work. Second, we explain incentives for work in the public assistance system, with a focus on the Basic Deduction, and examine its effect on the earnings of the recipients. In particular, we examine the effect of the August 2013 reform of the Basic Deduction using descriptive statistics as well as panel regression based on an event-study design.

　This paper organises the variations of countermeasures put in place by countries around the world as their emergency financial measures to cope with the COVID-19 crisis that hit the world at the beginning of 2020. At the same time, it surveys policy evaluation analyses in countries that implemented similar policies as Japan’s emergency financial measures. In particular, it surveys reports published over the past few years on analyses in the United States, South Korea, and Israel that implemented direct transfer policies on household budgets, similar to Japan’s special cash payments, analyses in the United States and Australia that implemented employment retention policies similar to Japan’s employment adjustment subsidy, and analyses in Germany that reduced value-added tax (consumption tax) rates, which was not implemented but much debated in Japan. By summarising the experiences and analysis results in these countries, this paper organises the suggestions and implications related to future policy formation in Japan.