Long-term Forecasts of Age-specific Labour Market Participation Rates with Functional Data Models
Many countries have implemented social programmes providing long-term financial or in-kind entitlements. These programmes 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 programmes. The expected development of the labour force is a key input to these forecasts. We suggest combining a functional data approach to age-profiles of labour market participation rates with information on education, marital status and other exogenous variables to improve long-term forecasts of labour supply.