Functional Disability with Systematic Trends and Uncertainty: A Comparison between China and the U.S.

66 Pages Posted: 19 Mar 2021 Last revised: 29 Oct 2021

See all articles by Yu Fu

Yu Fu

Central University of Finance and Economics

Michael Sherris

University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies; UNSW Business School

Mengyi Xu

Purdue University; University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR)

Date Written: February 15, 2021

Abstract

China and the U.S. are two contrasting countries in terms of functional disability and long-term care. China is experiencing declining family support for long-term care and developing private long-term care insurance. The U.S. has a more developed public aged care system and private long-term care insurance market than China. Changes in the demand for long-term care are driven by the levels, trends and uncertainty in mortality and functional disability. To understand the future potential demand for long-term care, we compare mortality and functional disability experiences in China and the U.S., using a multi-state latent factor intensity model with time trends and systematic uncertainty in transition rates. We estimate the model with the Chinese Longitudinal Healthy Longevity Survey (CLHLS) and the U.S. Health and Retirement Study (HRS) data. The estimation results show that if trends continue, both countries will experience longevity improvement with morbidity compression and a declining proportion of the older population with functional disability. Although the elderly Chinese have a shorter estimated life expectancy, they are expected to spend a smaller proportion of their future lifetime functionally disabled than the elderly Americans. Systematic uncertainty is shown to be significant in future trends in disability rates and our model estimates higher uncertainty in trends for the Chinese elderly, especially for urban residents.

Keywords: functional disability, life expectancy, systematic trend and uncertainty, multi-state latent factor intensity model

Suggested Citation

Fu, Yu and Sherris, Michael and Xu, Mengyi, Functional Disability with Systematic Trends and Uncertainty: A Comparison between China and the U.S. (February 15, 2021). UNSW Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3785743 or http://dx.doi.org/10.2139/ssrn.3785743

Yu Fu

Central University of Finance and Economics ( email )

Beijing
China
+8615010103529 (Phone)

Michael Sherris

University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies ( email )

UNSW Business School
Risk and Actuarial Studies
Sydney, NSW 2052
Australia
+61 2 9385 2333 (Phone)
+61 2 9385 1883 (Fax)

HOME PAGE: http://www.asb.unsw.edu.au/schools/Pages/MichaelSherris.aspx

UNSW Business School ( email )

Sydney, NSW 2052
Australia

Mengyi Xu (Contact Author)

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

Level 6, Central Lobby (enter via East Lobby)
Australian School of Business Building
Sydney, New South Wales NSW 2052
Australia

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