Stochastic Infinite Horizon Forecasts for Social Security and Related Studies
AbstractThis paper consists of three reports on stochastic forecasting for Social Security, on infinite horizons, immigration, and structural time series models. 1) In our preferred stochastic immigration forecast, total net immigration drops from current levels down to about one million by 2020, then slowly rises to 1.2 million at the end of the century, with 95% probability bounds of 800,000 to 1.8 million at the century's end. Adding stochastic immigration makes little difference to the probability distribution of the old age dependency ratio. 2) We incorporate parameter uncertainty, stochastic trends, and uncertain ultimate levels in stochastic models of wage growth and fertility. These changes sometimes substantially affect the probability distributions of the individual input forecasts, but they make relatively little difference when embedded in the more fully stochastic Social Security projection. 3) Using a 500-year stochastic projection, we estimate an infinite horizon balance of -5.15% of payroll, compared to the -3.5% of the 2004 Trustees Report, probably reflecting different mortality projections. Our 95% probability interval bounds are -10.5 and -1.3%. Such forecasts, which reflect only "routine" uncertainty, have many problems but nonetheless seem worthwhile.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10917.
Date of creation: Nov 2004
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Find related papers by JEL classification:
- H0 - Public Economics - - General
- H5 - Public Economics - - National Government Expenditures and Related Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-11-22 (All new papers)
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