A Modified Lee-Carter Method Adjusting for Smoothing and Lifespan Disparity
Stefano Mazzuco, University of Padova
Ahbab Mohammad Fazle Rabbi, University of Padua
Lee-Carter method and its later variants are widely accepted extrapolative methods for mortality forecasting due to simplicity. This model assumes an invariant age component and linear time component for forecasting and does not utilize any smoothing technique during model fitting or forecasting. We propose to apply the Lee-Carter method on smoothed mortality rates obtained by LASSO type regularization and hence to partially adjust the time component to match the observed lifespan disparity (e0†). Smoothing by lasso produces less error during fitting period compared to other spline based smoothing techniques. As a more informative indicator of longevity, partially matching with e0† made the time component more reflective of the mortality improvement. The suggested modification generates less forecast errors for mortality rates for lower mortality countries and more accurate life expectancy forecasting for comparatively high mortality regime.
Session 1068: Data and Methods