Stochastic demographic forecasting

Abstract

This paper describes a particular approach to stochastic population forecasting, which is implemented for the USA through 2065. Statistical time series methods are combined with demographic models to produce plausible long run forecasts of vital rates, with probability distributions. The resulting mortality forecasts imply gains in future life expectancy that are roughly twice as large as those forecast by the Office of the Social Security Actuary. The method for forecasting fertility is useful mainly for providing estimates of the variance and autocorrelation in fertility forecast errors, and not for making stand-alone point forecasts. The forecasts of the probability distributions of the vital rates can then be used in a stochastic Leslie matrix to produce stochastic population forecasts. These provide probability distributions for the quantities forecast, reflecting lower bound estimates of uncertainty. Resulting stochastic forecasts of the elderly population, elderly dependency ratios, and payroll tax rates for health, education and pensions are presented.