STAT 651 Demographic Analysis

Demographic analysis includes the things that allow us to measure the dimensions and dynamics of
populations. These methods have primarily been developed to study human populations, but are
extended to a variety of areas where researchers want to know how populations of social actors can
change across time through processes of birth, death, and migration. In the context
of human biological populations, demographic analysis uses administrative records to develop an
independent estimate of the population. Demographic analysis estimates are often considered a
reliable standard for judging the accuracy of the census information gathered at any time. In the labor
force, demographic analysis is used to estimate sizes and flows of populations of workers;
in population ecology the focus is on the birth, death, migration and immigration of individuals in a
population of living organisms, alternatively, in social human sciences could involve movement of firms
and institutional forms. Demographic analysis is used in a wide variety of contexts.
For example, it is often used in business plans, to describe the population connected to the geographic
location of the business. Demographic analysis is usually abbreviated as DA. For the 2010 U.S.
Census, The U.S. Census Bureau has expanded its DA categories. Also as part of the 2010 U.S.
Census, DA now also includes comparative analysis between independent housing estimates, and
census address lists at different key time points.
Demography is the statistical and mathematical study of the size, composition, and spatial
distribution of human populations and how these features change over time. Data are obtained from
a census of the population and from registries: records of events like birth, deaths, migrations,
marriages, divorces, diseases, and employment. To do this, there needs to be an understanding of
how they are calculated and the questions they answer which are included in these four
concepts: population change, standardization of population numbers, the demographic bookkeeping
equation, and population composition.

Population change is analyzed by measuring the change between one population size to
another. Global population continues to rise, which makes population change an essential component
to demographics. This is calculated by taking one population size minus the population size in an
earlier census. The best way of measuring population change is using the intercensal percentage
change. The intercensal percentage change is the absolute change in population between the
censuses divided by the population size in the earlier census. Next, multiply this a hundredfold to
receive a percentage. When this statistic is achieved, the population growth between two or
more nations that differ in size, can be accurately measured and examined.
For there to be a significant comparison, numbers must be altered for the size of the population that
is under study. For example, the fertility rate is calculated as the ratio of the number of births to women
of childbearing age to the total number of women in this age range. If these adjustments were not
made, we would not know if a nation with a higher rate of births or deaths has a population with more
women of childbearing age or more births per eligible woman.
Within the category of standardization, there are two major approaches: direct standardization and
indirect standardization.
Direct standardization is able to be used when the population being studied is large enough for age-
specific rate is stable.
Indirect standardization is used when a population is small enough that the number of events (births,
deaths, etc.) are also small. In this case, methods must be used to produce a standardized mortality
rate (SMR) or standardized incidence rate (SIR).
Demographic bookkeeping is used in the identification of four main components of population
growth during any given time interval.
The demographic bookkeeping equation is as follows:
P2 = P1 + (B-D) + (Mi-M0)
The four components being studied by this equation are population growth (P1, P2), Births (B),
Deaths (D), and in- (Mi) and out- (Mo) migration.
Meaning, the population at any time is equal to the earlier population plus the excess of births
over deaths in the time, plus the amount of in-migration minus the amount of out-migration.
Population composition is the description of population defined by characteristics such as age, race,
sex or marital status. These descriptions can be necessary for understanding the social
dynamics from historical and comparative research. This data is often compared using a population
pyramid.
Population composition is also a very important part of historical research. Information ranging back
hundreds of years is not always worthwhile, because the numbers of people for which data are
available may not provide the information that is important (such as population size). Lack of
information on the original data-collection procedures may prevent accurate evaluation of data quality.

Demographic Analysis in Institutions and Organization

A. Labor market
The demographic analysis of labor markets can be used to show slow population growth, population
aging, and the increased importance of immigration. The U.S. Census Bureau projects that in the next
100 years, the United States will face some dramatic demographic changes. The population is
expected to grow more slowly and age more rapidly than ever before and the nation will become a
nation of immigrants. This influx is projected to rise over the next century as new immigrants and their
children will account for over half the U.S. population. These demographic shifts could ignite major
adjustments in the economy, more specifically, in labor markets.
B. Turnover and in internal labor markets
People decide to exit organizations for many reasons, such as, better jobs, dissatisfaction, and
concerns within the family. The causes of turnover can be split into two separate factors, one linked
with the culture of the organization, and the other relating to all other factors. People who do not fully
accept a culture might leave voluntarily. Or, some individuals might leave because they fail to fit in and
fail to change within a particular organization.
C. Population ecology of organizations
A basic definition of population ecology is a study of the distribution and abundance of organisms. As
it relates to organizations and demography, organizations go through various liabilities to their
continued survival. Hospitals, like all other large and complex organizations are impacted in the
environment they work. For example, a study was done on the closure of acute care hospitals in
Florida between a particular time. The study examined effect size, age, and niche density of these
particular hospitals. A population theory says that organizational outcomes are mostly determined
by environmental factors. Among several factors of the theory, there are four that apply to the hospital
closure example: size, age, density of niches in which organizations operate, and density of niches in
which organizations are established.
Business organizations
Problems in which demographers may be called upon to assist business organizations are when
determining the best prospective location in an area of a branch store or service outlet, predicting the
demand for a new product, and to analyze certain dynamics of a company's workforce. Choosing a
new location for a branch of a bank, choosing the area in which to start a new supermarket, consulting
a bank loan officer that a particular location would be a beneficial site to start a car wash, and
determining what shopping area would be best to buy and be redeveloped in metropolis area are types
of problems in which demographers can be called upon.
Standardization is a useful demographic technique used in the analysis of a business. It can be used
as an interpretive and analytic tool for the comparison of different markets.
Nonprofit organizations
These organizations have interests about the number and characteristics of their clients so they can
maximize the sale of their products, their outlook on their influence, or the ends of their power, services,
and beneficial works.

LIFE CONTINGENCIES
Any payment that become due only after the occurrence of some uncertain events, such as the
continued existence or the death of a particular person, is called a contingent payment. Hence
the theory of life insurance deals contingent payment, each of which has a certain probability of
being made. Thus, to commence the study of life insurance, it is appropriate remarks about
probability. The following discussion is given on an intuitional basis.

Background Relating to Probability

The language of probability is used as a means for expressing varying degrees of confidence in
the occurrence of an uncertain events E, whenever it has an opportunity to occur or fail to occur.
Consider an experiment T which makes it possible for an uncertain event E to occur or fail to
occur. Any performance of T will be called a trial of T. At any trial, suppose that there are N
possible outcomes for T. We shall call a particular trial, or its outcome, a success if E occurs and
a failure if E does not occur. We assume that N outcomes are equally likely with S successes and
F failure, where S+F =N. Then the probability p that E will occur at any trial, and the probability q
that E will not occur, are define by:
𝑆 𝐹
𝑃 = 𝑁 𝑎𝑛𝑑 𝑞 = 𝑁 (1)

Since S+F=N, we verify that 𝑝 + 𝑞 = 1 (2)

Example:
1. Consider a die with its faces numbered {1,2,3,4,5,6} respectively. Let the experiment T consist
of tossing the die and observing the number on the face which is up when the die comes to rest.
Let E be the event that {2 or 4} appears, or is tossed at a trial of T. Then in (1), we have N=6 and
2 1 2
S=2. Hence, the probability of {2 or 4} being tossed is 𝑝 = = 𝑎𝑛𝑑 𝑞 = .
6 3 3
In (1) and (2), we observe certain results are true for the probability of an event E regardless of
the corresponding definition of probability. That is, in any setting, 0 ≤ 𝑝 ≤ 1; 0 ≤ 𝑞 ≤ 1; {𝑝 =
1 𝑎𝑛𝑑 𝑞 = 0} means that the event E is certain to occur at each trial of the experiment involved
; {𝑝 = 1 𝑎𝑛𝑑 𝑞 = 0} means that the event E is certain not to occur at any trial.
In arriving at (1), we dealt with an experiment T where the number (finite) and nature of the
possible outcome of T at any trial remain constant and are known in advance of the trial. Hence,
the corresponding concept of probability is called an “a priori” probability because it is based on
advance knowledge of the outcome of T. The mathematical foundation of life insurance does not
bring in a priori probability. However, the theory involves methods validity is a consequence of
advanced results about such type of probability.
Consider an experiment T which is not of a type where all possible outcomes of T at any trial are
known in advance. However, let us assume that an unknown probability p exists for the
occurrence of some specified event E. at any trial T. Suppose that N trials of T have been made,
and that just S of them were successes for E. Often it is desirable then to take the relative
frequency S/N of successes for E in the past N trials as the probability that E will occur at any
future trial. Let
𝑆
𝑃=
𝑁
We refer to p as an experimental or empirical probability for E. This is also referred to as “a
posteriori” probability because it is obtained from the past experiences.

Law of Large Number

Suppose that N trials of an experiment T are made, where the probability, at any trial of successes
for an event E is p. Then, it is likely that the relative frequency of successes, S/N for E in the N
trials will be as close to p as we desire if N is sufficiently large.
A Mortality Table
The basis of the theory of life insurance is a mortality or life table. A mortality table has been
defined as the instrument by means of which are measured the probabilities of life and death. A
mortality table is purely a record of the past experience and, naturally, its uses in predicting future
events implies the expectations that the experience of the past will be duplicated in the future.
The two principal sources of life tables are general population statistics obtained from the census
and the mortality records of life insurance companies. The number of deaths are obtained at each
age from the official record of deaths, the rate of mortality at any age is obtained by dividing the
number of deaths by an adjusted figure representing the number exposed to the risk of death at
that age. Insured lives from a “select” group which those lives subject to high rates of mortality
have been eliminated by medical examination or otherwise. The population table, however,
includes many in poor health and others engaged in hazardous or unhealthy occupations. It is to
be expected, therefore, that the rate of mortality in a table constructed from population record will
be higher than the rates of mortality in a table based on the experience of life insurance
companies.
In the construction of a mortality table, it is assumed that the upper limit of ages involved will be
99 years, with all individuals assumed to die on or before ages 100 years, Consider the N people
of age x in the past experience of the insurance companies, and learning the number S of these
people who lived to age (x+1). Let px represent the probability that a man of age x will live to age
(x+1). Then px=S/N.
The steps in the construction of life table are as follow. First, the empirical probabilities are found,
Then, an arbitrary large number is specified as the number of infants, all assumed to be born on
the same day, whose deaths in subsequent years will be tabulated. This number is called the
radix of the table to be formed, and is 10,000,000 in the corresponding Table 1. Then a mortality
table is calculated showing how the radix group reduces in size due to deaths, year by year, on
the basis of the statistical probabilities that a man of age x will live to age (x+1)p x. This table is
called the Commissioner’s Standard Mortality or CSO Table.

The following notations will be used with CSO table;

[x] = a person from the radix group who is alive at age x

lx = the number of the group who are still alive at age x
dx = the number of the group alive at age x who die before age (x+1)
px = the probability of [x] living to age (x+1)
qx = the probability of [x] dying before age (x+1)

The following relationships are obtained:

𝑙𝑥+1
𝑃𝑥 = 𝑜𝑟 𝑙𝑥+1 = 𝑝𝑥 𝑙𝑥
𝑙𝑥
𝑑𝑥 = 𝑙𝑥 − 𝑙𝑥+1 𝑜𝑟 𝑙𝑥+1 = 𝑙𝑥 − 𝑑𝑥
𝑑𝑥
𝑞𝑥 = 𝑜𝑟 𝑑𝑥 = 𝑞𝑥 𝑙𝑥
𝑙𝑥
𝑙𝑥+1 𝑑𝑥 𝑙𝑥+1 + (𝑙𝑥 − 𝑙𝑥+1 ) 𝑙𝑥
𝑝𝑥 + 𝑞𝑥 = + = = =1
𝑙𝑥 𝑙𝑥 𝑙𝑥 𝑙𝑥