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Stochastic Population Forecast for Germany and its Consequence for the German Pension System

Author

Listed:
  • Wolfgang Härdle
  • Alena Mysickova

Abstract

Population forecasts are crucial for many social, political and economic decisions. Official population projections rely in general on deterministic models which use different scenarios for future vital rates to indicate uncertainty. However, this technique shows substantial weak points such as assuming absolute correlations between the demographic components. In this paper, we argue that a stochastic projection alternative, with no a priori assumptions provides point forecasts and probabilistic prediction intervals for demographic parameters in addition. Age-sex specific population forecast for Germany is derived through a stochastic population renewal process using forecasts of mortality, fertility and migration. Time series models with demographic restrictions are used to describe immigration, emigration and time varying indices of mortality and fertility rates. These models are then used in the simulation of future vital rates to obtain age-specific population forecast using the cohort-component method. The consequence for the German pension system is discussed. To maintain the actual average pension level the premium rate of the present system rises at least by 50% as the old-age ratio nearly doubles by 2040.

Suggested Citation

  • Wolfgang Härdle & Alena Mysickova, 2009. "Stochastic Population Forecast for Germany and its Consequence for the German Pension System," SFB 649 Discussion Papers SFB649DP2009-009, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2009-009
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    Cited by:

    1. Roland Strausz, 2009. "The Political Economy of Regulatory Risk," SFB 649 Discussion Papers SFB649DP2009-040, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    2. Michał Grajek & Lars-Hendrik Röller, 2012. "Regulation and Investment in Network Industries: Evidence from European Telecoms," Journal of Law and Economics, University of Chicago Press, vol. 55(1), pages 189-216.
    3. Barbara Choroś & Wolfgang Härdle & Ostap Okhrin, 2009. "CDO and HAC," SFB 649 Discussion Papers SFB649DP2009-038, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    4. Markéta Arltová & Jitka Langhamrová & Jana Langhamrová, 2013. "Development of Life Expectancy in the Czech Republic in Years 1920-2010 with an Outlook to 2050," Prague Economic Papers, University of Economics, Prague, vol. 2013(1), pages 125-143.
    5. Maria Grith & Wolfgang Härdle & Juhyun Park, 2009. "Shape invariant modelling pricing kernels and risk aversion," SFB 649 Discussion Papers SFB649DP2009-041, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

    More about this item

    Keywords

    Demographic Forecasting; Population Projection; Stochastic Demography;

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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