Long-term forecasts of age-specific participation rates with functional data models

Many countries have implemented social programs providing long-term financial or in-kind entitlements. These programs often focus on specific age-groups and consequently their expenditure streams are subject to demographic change. Given the strains already existing on public budgets, long-term forecasts are an increasingly important instrument to monitor the budgetary consequences of social programs. The expected development of the labour force is a key input to these forecasts. We Produce forecasts of age-specific labour market participation rates, combining a functional data approach with information on education, marital status and other exogenous variables.