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 2BS 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 projections  ministry of interior: registration for social benefits  ministry of commerce: inflation  ministry 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

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 UN life tables

Deaths(2010) = Mortality(2010) x Pop(2010) Deaths(2010) = Mortality(2010) x Pop(2010) Survival(2011) = Pop(2010) - Deaths(2010) Age MortalityPopDeathsSurvival Male ,2092, , , , , , , , , ,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 NewbornsNewborns (M) Newborns (F) ,552,60025,01512,87212, ,557,443176,71990,93385, ,617,716325,382167,430157, ,671,012212,613109,403103, ,824,04086,98044,75742, ,830,25120,94410,77710, ,733,6802,1871,1251,062 Total TFR = ,786,742849,840437,297412,543 Estimating number of newborns Newborns = Fertility x Female pop Newborns = 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 Unemployed 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

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

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

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