Empirical Evidence from the Three-Way LC Model

Abstract

The three-way Lee-Carter (LC) model was proposed as an extension of the original LC model when a three-mode data structure is available. It provides an alternative for modelling mortality differentials. This variant of the LC model adds a subpopulation parameter that deals with different drifts in mortality. Making use of several tools of exploratory data analysis, it allows giving a new perspective to the demographic analysis supporting the analytical results with a geometrical interpretation and a graphical representation. When facing with a three-way data structure, several choices on data pre-treatment will affect the whole data modelling. The first step of three-way mortality data investigation should be addressed by exploring the different source of variations and highlighting the significant ones. In this contribution, we consider the three-way LC model investigated by means of a three-way analysis of variance with fixed effects, where the three main effects, the three two-way interactions and one three-way interaction are analyzed. Aim of the paper is to highlight the technical-applicative infrastructure behind the methodology.