Microsimulation paper No. 1

A Model For Simulating Life Histories of The Elderly: Model Design and Implementation Plans.

August 1995

Douglas A. Wolf, Jan Ondrich, Kenneth G. Manton, Eric Stallard, Max A. Woodbury, and Larry Corder

Abstract: This paper provides a strategy for the development of a model of life-cycle change in
functional status, economic well-being, and family composition, with particular attention to
persons aged 65 and older. The overall goal is to use the model as the basis for individual-level
projections of the later life cycle, that is, microsimulation. Specifically, the scope of the project

  1. Specification and estimation of equations for the dynamics of functional status, nursing
    home occupancy, income and death among those aged 65+, using data from the 1982,
    1984, and 1989 National Long-Term Care Survey (NLTCS) linked to Medicare data
    for 1982-1993, based on extensions of the Grade of Membership (GoM) framework;

  2. Developing equations for year-to-year income streams, determined jointly with changes
    of marital status, for all ages represented in the cohorts to be simulated;

  3. Estimating parameters governing the dynamics of family composition (existence and
    characteristics of spouse, parent[s] and child[ren]);

  4. Integrating the results of the above modeling efforts in a microsimulation computer
    program with the capacity to dynamically simulate life histories, focusing on the
    elderly population;

  5. Validating the model by comparing its results to actual data where possible, analyzing
    uncertainty attached to the output from the microsimulation model, and conducting
    sensitivity analyses using alternative assumptions regarding trends in model parameters;
  6. Using microsimulation, producing disaggregated projections of the elderly population
    and its characteristics, for example cohort profiles of active life expectancy, or
    comparisons over time in the health, family structure and economic well-being of the

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