Stochastic Forecasting of Labor Supply and Population: An Integrated Model

Abstract

This paper presents a stochastic model to forecast the German population and labor supply until 2060. Within a cohort-component approach, our population forecast applies principal components analysis to birth, mortality, emigration, and immigration rates, which allows for the reduction of dimensionality and accounts for correlation of the rates. Labor force participation rates are estimated by means of an econometric time series approach. All time series are forecast by stochastic simulation using the bootstrap method. As our model also distinguishes between German and foreign nationals, different developments in fertility, migration, and labor participation could be predicted. The results show that even rising birth rates and high levels of immigration cannot break the basic demographic trend in the long run. An important finding from an endogenous modeling of emigration rates is that high net migration in the long run will be difficult to achieve. Our stochastic perspective suggests therefore a high probability of substantially decreasing the labor supply in Germany.

A Principal Component Simulation of Age-Specific Fertility – Impacts of Family and Social Policy on Reproductive Behavior in Germany

“…Moreover, the restriction to one simple fertility index completely ignores the uncertainty associated with the remaining PCs, which leads to an overall underestimation of future risks. Fuchs et al (2018) used a similar approach to forecast the labor force in Germany until 2060. They distinguished between nationals and foreigners, thereby including possible effects of international migration on fertility.…”

“…to 232,476 in 2016 (0.398). Because immigration is expected to decrease slowly in the future (see, e.g., Fuchs et al 2018;Vanella and Deschermeier 2018), this increase in the ASFRs for younger females is expected to quickly revert to its long-term trend and the ASFRs will continue to decrease.…”

Stochastic Forecasting of Demographic Components Based on Principal Component

“…The Lee-Carter models are currently very popular in mortality and fertility forecasting. Some scientists in Germany have recently used similar models to forecast age-and sex-specific fertility and mortality rates (see, e.g., Fuchs et al, 2018;Härdle und Myšičkova, 2009;Lipps andBetz, 2005, Vanella, 2017). Deschermeier (2015) applied the Hyndman-Ullah (2007) model, which is a PCTS model adjusted for robustness and with functional PCs, allowing for the loadings explained in Section "Introduction to Principal Component Analysis" to vary over time.…”

The Evolution of the Elderly Labor Force Participation and Retirement in Brazil

“…The main assumption is that as population gets more educate labor supply will increase since more educated workers have higher participation. In a different vein, time-series approach can be use to forecast labor force participation [Fuchs andWeber, 2018, Michaud and. The general idea is to relate labor force participation rates and trends to a series of explanatory variables trends [Fuchs and Weber, 2018].…”

“…In a different vein, time-series approach can be use to forecast labor force participation [Fuchs andWeber, 2018, Michaud and. The general idea is to relate labor force participation rates and trends to a series of explanatory variables trends [Fuchs and Weber, 2018]. An alternative approach is to estimate the working life expectancy for individuals above certain age Myrskyla, 2017, Dudel, Lopez-Gomes, andBenavides, 2018].…”