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Can Population Projections be Used for Sensitivity Tests on Policy Models? - WP 03/07

4  ‘Low-low or ‘high-high’ variants are not calculated

Even when time series for fertility, mortality, and migration are each restricted to 3-4 different alternatives, a statistical agency that wanted to cover all possible combinations of these series would need to produce 27-64 projection variants. In practice, statistical agencies produce only a fraction of the possible number. Statistics New Zealand, for instance, produces eight different projection variants, and the United Nations Population Division produces four.

Many of the possible variants that are not produced are nevertheless plausible. Neither Statistics New Zealand nor the UN Population Division routinely publish variants combining their low fertility and low mortality assumptions. Yet it is possible that fertility and mortality rates will both be lower in future than is currently expected: in developed countries, fertility and mortality are at present much lower than most demographers were predicting 30 year ago.

Some of the variants that are not produced but are nevertheless plausible give more extreme results than the variants that are produced. The combination of low fertility and low mortality, for instance, yields a higher ratio of old people to young people than any other variant. The combination of high fertility and high mortality, which is also not generally calculated, yields a lower ratio of old to young than any other variant. Omitting low-low and high-high variants leads to an artificially narrow range for ratios between old and young.

Forecasts of health expenditures per capita are significantly affected by the ratio of old to young, since old people attract much greater expenditure per capita than young people. Forecasts of pension expenditures are, of course, even more strongly affected. The potential importance of demographic trends is, however, understated when the range for the ratios between old and young is narrow. This is another instance of Case 6.

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