Household forecasting: Preservation of age patterns

Abstract

We formulate a time series model of household dynamics for different age groups. We model the shares of the population who are in certain household positions (living alone, living with a partner, etc.). These household positions have very pronounced age patterns. The age profiles change slowly over time, due to changes in the home leaving behaviour of young adults, differences in survival rates of men and women, etc. When forecasting household positions to 2040, we want to preserve the characteristics of the age profiles. We test the Lee–Carter model and the Brass relational method using household data for the Netherlands for the period 1996–2010. Annual shares of the population by household position, age, and sex are modeled as random walks with adrift (RWD). While the Brass model has its limitations, it performs better than the Lee–Carter model in our application. The predicted age patterns based on the Brass model look more reasonable, because the Brass model is a two-parameter model, while the Lee–Carter model contains only one parameter. Also, the model parameters and standard errors of the Brass model are easier to estimate than those of the Lee–Carter model.