## Objective

The forecast is made with the intention of not only providing an overall figure for population, but also to provide a forecast that divides the Danish population by gender, age, origin and reason for residence in Denmark. The model is of particular interest when assessing future socio-economic challenges such as the aging-population and increasing life expectancy.

In addition to providing DREAM’s education forecast and socio-economic forecast with demographic based data, the population forecast is also used in assessing the future population of Denmark’s 98 municipalities.

## Description

Changes in the size and composition of the population are generally determined by the changes in the number of births and deaths as well as immigrants and emigrants. If the number of births and immigrants are higher than the number of deaths and emigrants, the population growth is positive, which in recent times, has characterised historical developments in Denmark. The difference between births and deaths is known as the birth surplus and the difference between immigrants and emigrants is known as net migration. The current positive population growth is derived from both a positive birth surplus and a net migration. This is expected to continue to be positive.

Overall population movements, such as those mentioned above, cover a considerable amount of variation across the underlying characteristics of the population. For example, immigration and emigration propensities are typically higher amongst individuals in their early to mid-20s, western immigrants have a higher tendency to emigrate than non-western immigrants and women have lower mortality rates than men in the same age groups.

There is a considerable uncertainty associated with the forecast of these population movements. This is obvious in the estimates of the number of future immigrants. This is attributable to the fact that immigration is largely controlled by policy and subject to developments in international conditions, both of which are hard to estimate and forecast. The abnormal numbers for immigration in 2015 are an example of the difficulties surrounding migration forecasting. The number of births also varies from year to year and highlights another source of challenge when estimating population. Developments in mortality rates have been relatively stable for a number of years, however, it is nevertheless possible to underestimate the actual mortality, especially in the case of extraordinary circumstances such as disease epidemics and extreme climatic conditions.

The forecast provides estimates for the difference between people inside and outside of working age, a factor crucial to assessing the fiscal challenges that future generations can expect to face. The overall pattern observed in the forecast is one that shows a decreasing proportion of the population within the working age.

## Application

The national population forecast provides the various other models built by the DREAM-group, such as the education and socioeconomic models, with future forecasted demographics. These models utilise the forecasted demographics to further forecast the population by highest completed education, labour market status and more. In particular, the socioeconomic forecast employs the forecasted changes to the mortality rate and life expectancy to evaluate the effect of a reform-driven increase in retirement-age which was initiated in 2011 by the retirement reform.

The population projection informs DREAM’s microsimulation model SMILE with overall demographic changes.

The model is also used to evaluate changes in the size of the population in relation to changes in demographics such as immigration, fertility, and mortality; the consequences of which can then be evaluated in socioeconomic forecasts and our economic models.

Statistics Denmark constructs a population forecast by evaluating population developments in Denmark’s 98 municipalities.

## Background

An important input for DREAM’s long-run economic forecasts is the labour force forecast, which in itself is dependent on a population forecast with a long time horizon. This, combined with the desire to be able to evaluate the effect of changes to demographics on the economy, has motivated the development of the national population forecast, beginning its development in 1999.

Since 2010, DREAM has collaborated with Statistics Denmark to develop the official population forecast for Denmark. Prior to this, DST developed both the regional as well as the national population forecasts. The result of the unification of forecasts not only removed confusion, but also allowed for more fruitful collaboration with other research institutes, especially in the Nordic countries. DST has maintained their role in estimating the regional population forecasts in Denmark.

The population forecast is continuously being developed. In 2018 it became possible to identify the children of descendants of immigrants in the model and recently the numbers of immigrants have become nuanced with the reason for residence. The latter allows for further description and variation in education behaviour and labour market status.

## Forecasting Method

In the model, the population is forecasted year by year based on changes in demographics i.e. births and immigration increase the population whilst deaths and emigration decrease the size of the population. The starting point of the projection is a starting population divided by gender, age, origin and reason of residence. Demographic changes are distributed by the same dimensions and are typically determined by the product of a probability and a so-called risk group. For example, the number of deaths in a given year is given by the probability of death multiplied by the number of people at the start of the year.

The probabilities are both assumed to be constant assumed to vary over the forecast period. Immigration and emigration probabilities are assumed constant, whereas mortality and fertility rates are dynamic. Whether they are constant or not, all probabilities are based on historical evidence and trends.