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Labor force participation and the discouraged worker effect

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  • John Dagsvik

    ()

  • Tom Kornstad

    ()

  • Terje Skjerpen

    ()

Abstract

This article analyzes labor force participation with particular reference to the discouraged worker effect. Discouraged workers are those who will search for work when the labor market is tight but do not search for work when the labor market is slack because they consider their chances of finding a suitable job too low. The theoretical point of departure is a search model where the worker evaluates the expected utility of searching for work and decides to participate in the labor market if the expected utility of search exceeds the utility of not working. From this framework, we derive an empirical model for the probability that the worker will be out of the labor force, unemployed, or employed. The model is estimated on a sample of married and cohabitating women in Norway covering the period from 1988 to 2008. The results show that the discouraged worker effect is substantial. On average, about one-third of those who are out of the labor force are discouraged, according to our analysis. Copyright Springer-Verlag 2013

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 45 (2013)
Issue (Month): 1 (August)
Pages: 401-433

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Handle: RePEc:spr:empeco:v:45:y:2013:i:1:p:401-433

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Related research

Keywords: Discouraged workers; Labor force participation; Labor supply; Random utility modeling; C35; J21; J22; J64;

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  1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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  10. John Dagsvik & Tom Kornstad & Terje Skjerpen, 2013. "Labor force participation and the discouraged worker effect," Empirical Economics, Springer, vol. 45(1), pages 401-433, August.
  11. Emerson, Jamie, 2011. "Unemployment and labor force participation in the United States," Economics Letters, Elsevier, vol. 111(3), pages 203-206, June.
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  16. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey: Part I," Economic Inquiry, Western Economic Association International, vol. 14(2), pages 155-89, June.
  17. John K. Dagsvik & Tom Kornstad & Terje Skjerpen, 2006. "Analysis of the discouraged worker phenomenon. Evidence from micro data," Discussion Papers 453, Research Department of Statistics Norway.
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  19. Benati, Luca, 2001. "Some empirical evidence on the 'discouraged worker' effect," Economics Letters, Elsevier, vol. 70(3), pages 387-395, March.
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Citations

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Cited by:
  1. Kornstad, Tom & Nymoen, Ragnar & Skjerpen, Terje, 2013. "Macroeconomic shocks and the probability of being employed," Economic Modelling, Elsevier, vol. 33(C), pages 572-587.
  2. Pål Boug & Ådne Cappelen & Torbjørn Eika, 2013. "The importance of the distribution sector for exchange rate pass-through in a small open economy. A large scale macroeconometric modelling approach," Discussion Papers 731, Research Department of Statistics Norway.
  3. Majumder, Rajarshi, 2011. "Female labour supply in india: proximate determinants," MPRA Paper 43250, University Library of Munich, Germany, revised Oct 2012.
  4. Giorgio Di Pietro & Toni Mora, 2011. "The effect of the l’Aquila earthquake on labour market outcomes," Working Papers 2011/41, Institut d'Economia de Barcelona (IEB).
  5. John Dagsvik & Tom Kornstad & Terje Skjerpen, 2013. "Labor force participation and the discouraged worker effect," Empirical Economics, Springer, vol. 45(1), pages 401-433, August.

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