Stochastic Infinite Horizon Forecasts for Social Security and Related Studies

Ronald Lee, Timothy Miller and Michael Anderson

No 10917, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This 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.

JEL-codes: H0 H5 (search for similar items in EconPapers)
Date: 2004-11
Note: AG PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.nber.org/papers/w10917.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:10917

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10917

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().