Module 12: Advanced Session on using the RAP

ILO, 2013

Key questions• What is the structure of the ILO RAP model? • What are the main sources of historical data and projections?• Dealing with POP– How to project the population?– How to calculate the survivors and newborns?– How to take into account migration?

• Dealing with EAP and LPR/AR– What are the parameters of the labour market?– How to project labour market data and unemployment rate?

• Dealing with ECO– How to project GDP and GDP deflator?

Labour market (EAP)

Demographic data (POP)

Macroeconomic data (ECO)

General government operations (GGO)

Costing of benefits

Summary and results

1. Input data

2. Estimated cost of benefits in absolute terms, as % of GDP, and as % of government expenditure

3. Projected cost of combined benefit packages

Structure of RAP

POP

AR

EAP ECO GGO(SQ)

BS 1 BS 2 BS 3 BS 4 BS 5

3. Summary of benefit costs

SUM

1. Input worksheets

2. Benefit worksheets to estimate the cost of scenarios

Structure of RAP

• national statistical offices• census and surveys• social security institutions and line ministries

ministry of planning: GDP and population projectionsministry of interior: registration for social benefitsministry of commerce: inflationministry of finance: budget, economic indicators

• central banks• research institutes, universities• UN/ILO population models, IMF’s World Economic Outlook

(alternative data sources)

Sources of data

• High, medium, and low projections of data reduce chances of error

• Finding reliable data is a challenge• Assumptions and projections may need to be done by

ourselves• Data from different sources may be conflicting and need to

be cleaned up and validated• Partnering with institutions (e.g. Institute of Statistics in

Indonesia, HISRO in Thailand) can provide comprehensive and coherent data, and validate assumptions and projections

Sources of data

Coresia RAP: ‘Population’

Dealing with POP• Projected population by age and gender is used in other

projections like labour force, number of unemployed, etc.• Population projections can be obtained from official sources

or self-projected using the cohort component method• Cohort component method uses current year (t) population

data, no. of newborns (linked to fertility), survivors (linked to mortality), and net migration, to project next year (t+1) population

Population in year t

Survival rate

Net migration

Population in year t +1

(for ages > 1)

Fertility rate

Sex ratio at birth

Population in year t +1

(for ages < 1 i.e. newborns)

Population in year t+1

(for all ages)

Cohort component method

Cohort component method

• The mortality rate is derived from life tables, from which the number of survivors can be determined

• Life tables can be used to depict life expectancy of the population and thus, estimate the number of deaths

• We can use life tables of a country, UN life tables and the Coale-Demeny life tables

Estimating mortality rates

• 5 life expectancy patterns were mapped.

• The geographical region predominant within each patterns gives the name to that pattern: Latin American pattern Chilean pattern South Asian pattern Far Eastern pattern General pattern 0 9 18 27 36 45 54 63 72 81 90

-0.050

0.000

0.050

0.100

0.150

0.200

0.250

0.300

0.350

Mortality pattern of females: e0=75 years

GeneralSouth AsiaFar EastLatin AmericaChile

UN life tables

Deaths(2010) =Mortality(2010) x Pop(2010)

Survival(2011) = Pop(2010) - Deaths(2010)

Age Mortality Pop Deaths SurvivalMale 2010 2010 2011

0 0.0084 356,209 2,992

1 0.0007 373,622 262 353,217

2 0.0007 403,800 283 373,360

3 0.0007 449,310 315 403,517

4 0.0007 414,605 290 448,995

5 414,315

Estimating mortality rates

• Age-specific fertility rate: Number of child births for women of a particular age.

• Total fertility rate: Average number of children a woman can give birth to during her lifetime; it is the sum of the age-specific fertility rates during the child bearing period

• Typical child-bearing period is from age 15 to 49• Sex ratio: Ratio of males to females in the population

Fertility rate

Age group Fertility rate

Female Pop

Newborns Newborns (M)

Newborns (F)

15-19 0.00980 2,552,600 25,015 12,872 12,14320-24 0.06910 2,557,443 176,719 90,933 85,78625-29 0.12430 2,617,716 325,382 167,430 157,95230-34 0.07960 2,671,012 212,613 109,403 103,21035-39 0.03080 2,824,040 86,980 44,757 42,22340-44 0.00740 2,830,251 20,944 10,777 10,16745-49 0.00080 2,733,680 2,187 1,125 1,062Total TFR =1.609 18,786,742 849,840 437,297 412,543

Estimating number of newbornsNewborns =

Fertility x Female pop

• Net migration = Immigration (inbound migrants) – Emigration (outbound migrants)

• International migration can fluctuate widely every year depending on socioeconomic and political factors. Thus, it is primarily forecast in numbers by age group and gender, rather than as rates.

• International migration is usually small compared to total population.

• Usually we assume net migration = 0

Estimating net migration

Coresia RAP: ‘Economically Active Population’

We need historical data, projected distribution of the parameters by age group and gender:• Labour force or Economically Active Persons (EAP)• Labour market participation rate or activity rate• Employed persons• Unemployed persons• Unemployment rate

Labour force data

Population (>15)

Labour force or Economy

Active Population

Employed

Unemploye

d

Non Labour Force

(including students, retirees, disabled)

Unemployment rate (%) = No. of unemployed /

Labour force

Labour force participation rate (%) =

Labour force / Total population above legal

working age

Labour force data

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 951000

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Pop_M

LAB_M

Age

Demographic and labour force data: Thailand, 2007

Labour force data

• Unemployed persons = Projected male EAP x Male unemployment rate + Projected female EAP x Female unemployment rate

• Unemployment rate = Unemployed persons / EAP• Historical unemployment rates are used to calculate a trend• The trend is used to project unemployment rates

Estimating unemployment data

Historical data and trend lines for unemployment rate in Coresia

Estimating unemployment data

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

0.5

1

1.5

2

2.5

3

3.5

4

f(x) = − 0.859724171938104 ln(x) + 3.22155973816361R² = 0.972115365036429f(x) = − 0.926692519838334 ln(x) + 3.20084161460719R² = 0.947435793224986

MalesLogarithmic (Males)FemalesLogarithmic (Females)

Coresia RAP: ‘Economic’

• Mainly concerned with projections of economic growth• Macroeconomic projections can be obtained from official

sources, research institutes, national authorities, international organizations, or be self-projected

• GDP at current price = GDP at constant price (volume effect) x GDP deflator (price effect)

• Using the formulas, participants can project one parameter provided the other two are available

• GDP at constant price = Productivity * Employment• Employment = Labour force (EAP) – Unemployment

Dealing with ECO

Dealing with ECO

• Inflation is the rate of increase in the average price level of the economy. It is commonly measured by CPI, headline inflation, GDP deflator

• GDP deflator compares prices of all goods and services produced within the country in the current year, with the base year prices

• CPI reflects the prices of goods and services purchased by the consumers

• Headline inflation reflects the prices of all goods and services consumed in the country, including fuel and food

• In developing countries, headline inflation may be preferred

Dealing with ECO