Forecasting Mortality Rates For China With The Lee-Carter Model

Three decades of reform and opening up, because of the rapid development of Chinese economy, the medical technology and people’s living standard which has also been significantly improved, mortality has decreased steadily in China. In this case, the future trend of decline in mortality is likely to continue. The decline of the population mortality rates and the extension of life expectancies, especially in the non-expected mortality decreased, will bring unexpected financial pressure to the pension system, In this case, the systematic and scientific study of population evolution has great significance to the sustainable development of China’s economy.Firstly, we make general comments on the historical data of the mortality rates in China. Secondly we use the method proposed by Eduardo E. Arriaga to break down the contribution of the mortality change on the life expectancy at birth, which can grasp the historical data characteristics and give some help to the modeling on the mortally rates. Then, we use the Lee-Carter model to fit the data of the age-specific mortality rates from 1994 to 2007 and forecast the mortality rates during the next 11 years. Based on the forecasts generated by the Lee-Carter model, we forecast the life expectancies at birth too.The main purpose of this dissertation is to improve the methodology for forecasting Chinese mortality in order to enhance model performance and increase forecasting power. This dissertation examines the way in witch the Lee-Carter model can be introduced into China with the limited mortality data available. Two questions will be answered in this dissertation. The first is how to apply the Lee-Carter method to the Chinese data, in which the historical data is only available for a small number of time periods. The second question relates to the quality of results that can be derived through applying the Lee-Carter model.