Chapter 3. Policy Response to Risks in Foreign Countries

• Published in: The Japanese economy 2010-10, Vol.37 (3), p.74-128
• Main Authors: Aoki, Shuhei, Shimoi, Naoki, Nakagomi, Kimiya
• Format: Article
• Language: English
• Subjects: Economic policy; Employment; Income redistribution; Labor supply; Risk exposure; Studies
• ISSN: 1097-203X; 2329-194X; 2329-1958
• DOI: 10.2753/JES1097-203X370304

In countries with liberal policy regimes, the level of income redistribution by the government is extremely low, and individuals are therefore exposed to risk. However, the use of financial products (loans, etc.) to share risk compensates for the deficiencies of the policy regime. Countries with policy regimes that emphasize income redistribution policies experience the problem that a high level of benefits reduces the motivation to find work and lowers the labor supply. Sweden has adopted various measures to resolve these issues, including offering day-care services in order to encourage the entry of women into the workforce. The share of family allowances and unemployment benefits, which tend to suppress employment, is greater in France than in Sweden, and it is possible that they actually suppress employment. As indicated by measures including the Gini coefficient and the relative poverty rate, Japan can be considered deficient in terms of income redistribution by the government. However, Japan's income redistribution system is not in itself inferior to those of Sweden or France. Japan's problem is the high level of administrative discretion involved in the operation of its systems, as can be seen, for example, in the low take-up rate of the social assistance system.