The maximum entropy mortality model: forecasting mortality using statistical moments

ABSTRACT

The age-at-death distribution is a representation of the mortality experience in a population. Although it proves to be highly informative, it is often neglected when it comes to the practice of past or future mortality assessment. We propose an innovative method to mortality modeling and forecasting by making use of the location and shape measures of a density function, i.e. statistical moments. Time series methods for extrapolating a limited number of moments are used and then the reconstruction of the future age-at-death distribution is performed. The predictive power of the method seems to be net superior when compared to the results obtained using classical approaches to extrapolating age-specific-death rates, and the accuracy of the point forecast (MASE) is improved on average by 33% respective to the state-of-the-art, the Lee–Carter model. The method is tested using data from the Human Mortality Database and implemented in a publicly available R package.     

Give Macroeconomic Stability and Growth in Russia a Chance

This paper identifies and investigates conceptual and empirical links among Russia's disappointing growth performance of the mid-1990s, its costly and eventually unsuccessful stabilization, the macroeconomic meltdown of 1998 and the spectacular rise of non-payments. Non-payments developed into a system that flourished in an atmosphere of fundamental inconsistency between a macroeconomic policy geared at sharp disinflation and a microeconomic policy of bailing-out enterprises through soft budget constraints. It embodies a large volume of untargeted, implicit subsidies in the order of 7–10 per cent of GDP, which has stifled growth, contributed to the 1998 meltdown through its impact on public debt and made at best a questionable contribution to equity. The overwhelming priority at this point is to dismantle this system, thereby promoting enterprise restructuring and growth (by hardening budget constraints) and medium-term macroeconomic stability (by reducing the size of the subsidies).     

Has new business creation in russia come to a halt?

Successful transformation of centrally planned economies requires not just the privatization of the existing firms, but also the formation of new ones. New entrants serve to correct for the central planners' neglect of such sectors as services and consumer goods, and their bias in favor of large firms. Indeed, Central European economies have been experiencing a rapid rate of new business creation, as measured by the change in the number of small firms. Russia also experienced a short period of explosive growth in the number of new business. However, since 1994 net new business formation has stagnated. This paper looks into the possible causes of this phenomenon.Official data on the change in the number of small businesses, which serve as a proxy for net new business formation, arouse justified suspicion because of the frequent changes in the definition of “small enterprise.” Like everywhere in the world, some Russian registered firms do not become operational, and some firms that have ceased operations do not legally disband. If the share of these “dead souls” in the total count of small firms changes over time and official statistics does not adjust its count accordingly, the data may show the opposite of the actual processes. This paper analyzes Russian data collection procedures and other evidence, and concludes that stagnation in the new business formation is a real phenomenon, rather than a statistical artifact.The difficulty in finding out the causes of stagnation is that empirical studies focus on the existing businesses and miss those that should have been born but were not. The problems faced by the incumbents and frustrated entrants may well be different. The likely causes of the end of new business creation are the increased tax and regulatory burden, combined with plunder by the numerous tax and regulatory authorities. Other possible explanations involve the incumbents' use of the authorities and/or racketeers to erect barriers against new entrants.     

On the Sensitivity of Premiums and Reserves to Changes in Valuation Elements

Upon differentiating the Thiele differential equations and the equivalence condition with respect to some parameter appearing in the equations, one obtains differential equations for the derivatives of the state-wise reserves and the premium level with respect to the parameter. The solution to these equations measures the impact on premiums and reserves of a change in the parameter. Typically only numerical results can be obtained, but the method applies quite generally to multi-state policies and to virtually any parameter, and so represents a panacea in (the vast majority of) situations where analytical results are out of reach. Extensions to higher order derivatives and higher order conditional moments are straightforward. A difference method for computation is devised, and numerical results are reported for some practical cases.     

Options and efficiency in spaces of bounded claims

In a seminal contribution, Ross (1976) showed that a static finite state-space market can be completed by supplementing the primitive securities with ordinary call and put options. Galvani (2009) extends this result to norm separable _Lp$L_p$-spaces, with 1≤p<∞$1\le p<\infty$. This study concludes that options maintain the same spanning power in the space of bounded payoffs topologized by the duality with the space of the state price densities. In particular, under mild assumptions on the probability space, options written on a claim that is a.s. equal to an injective function complete the market.     

Age-specific dynamic labor demand and human capital investment

To study the optimal age-specific labor demand and human capital investment at the firm level we extend the standard dynamic labor demand model by introducing ‘age’ as a second dynamic variable and distinguish between two types of workers: ‘low skilled’ and ‘high skilled’. Applying an age-structured optimal control model we derive qualitative features of the optimal age-specific hiring and training effort. For the case of a linear revenue and production function we prove that firms do not anticipate changes in adjustment costs in their optimal decisions. This result no longer holds if a nonlinear revenue or production function is considered.     

Measuring potential gains from reallocation of resources

In this work we consider the case when efficient operation of individual economic units does not necessarily imply efficiency for a group of these units. Merging theoretical findings of Li and Ng (Int Adv Econ Res, 1995, 1, 377.) and Färe and Zelenyuk (Eur J Oper Res, 2003, 146, 615), we develop new group-wise efficiency indexes that measure the extent to which the performance of a group of economic units can be enhanced, even if all these units are individually efficient. The existence of such potential improvement is attributed to non-optimal allocation of inputs across the individual economic units from the point of view of a group of these units.