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Labour force participation in the euro area: a cohort based analysis

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  • Balleer, Almut
  • Gómez-Salvador, Ramón
  • Turunen, Jarkko

Abstract

We use a cohort based model to analyse determinants of labour force participation for disaggregated groups of workers in the euro area and the five largest euro area countries. The model captures age and cohort effects as indicators of (unobserved) determinants of participation behaviour. We use these effects and observed determinants to construct trends and projections of labour supply. Our results suggest that age and cohort effects can account for a substantial part of the recent increase in participation. Cohort effects are particularly relevant for women with those born in the late 1960s and early 1970s more likely to participate over the life-cycle. There is substantial variation in the estimated age and cohort effects across countries. Looking forward, positive cohort effects for women are not large enough to compensate for the downward impact of population ageing on participation rates in the euro area. JEL Classification: J11, J21

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1049.

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Date of creation: May 2009
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Handle: RePEc:ecb:ecbwps:20091049

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Keywords: cohort analysis; labour force participation; Labour market institutions;

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References

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  1. Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer, vol. 20(4), pages 833-867, October.
  2. Fitzenberger, Bernd & Schnabel, Reinhold & Wunderlich, Gaby, 2001. "The gender gap in labor market participation and employment: a cohort analysis for West Germany," ZEW Discussion Papers 01-47, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Stephanie Aaronson & Bruce Fallick & Andrew Figura & Jonathan Pingle & William Wascher, 2006. "The Recent Decline in the Labor Force Participation Rate and Its Implications for Potential Labor Supply," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 69-154.
  4. Genre, Véronique & Gómez-Salvador, Ramón & Lamo, Ana, 2005. "European women: Why do(n't) they work?," Working Paper Series 0454, European Central Bank.
  5. Raquel Fernandez, 2007. "Culture as Learning: The Evolution of Female Labor Force Participation over a Century," NBER Working Papers 13373, National Bureau of Economic Research, Inc.
  6. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  7. Ravn, Morten O. & Uhlig, Harald, 2001. "On Adjusting the HP-Filter for the Frequency of Observations," CEPR Discussion Papers 2858, C.E.P.R. Discussion Papers.
  8. Klaus Masuch & Ramon Gómez-Salvador & Nadine Leiner-Killinger & Rolf Strauch & Jarkko Turunen & Melanie Ward-Warmedinger & Jan De Mulder & Harald Stahl & Yvonne McCarthy & Daphne Nicolitsas & Aitor L, 2008. "Labour supply and employment in the euro area countries - developments and challenges," Occasional Paper Series 87, European Central Bank.
  9. Kosei Fukuda, 2006. "A cohort analysis of female labor participation rates in the U.S. and Japan," Review of Economics of the Household, Springer, vol. 4(4), pages 379-393, December.
  10. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  11. Jean-Marc Burniaux & Romain Duval & Florence Jaumotte, 2004. "Coping with Ageing: A Dynamic Approach to Quantify the Impact of Alternative Policy Options on Future Labour Supply in OECD Countries," OECD Economics Department Working Papers 371, OECD Publishing.
  12. Bruce Fallick & Jonathan Pingle, 2006. "A cohort-based model of labor force participation," Finance and Economics Discussion Series 2007-09, Board of Governors of the Federal Reserve System (U.S.).
  13. Antecol, Heather, 2000. "An examination of cross-country differences in the gender gap in labor force participation rates," Labour Economics, Elsevier, vol. 7(4), pages 409-426, July.
  14. Florence Jaumotte, 2003. "Female Labour Force Participation: Past Trends and Main Determinants in OECD Countries," OECD Economics Department Working Papers 376, OECD Publishing.
  15. Juan Prieto-Rodriguez & Cesar Rodriguez-Gutierrez, 2000. "The added worker effect in the Spanish case," Applied Economics, Taylor & Francis Journals, vol. 32(15), pages 1917-1925.
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Citations

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Cited by:
  1. Vendrik Maarten & Cörvers Frank, 2009. "Male and female labour force participation: the role of dynamic adjustments to changes in labour demand, government policies and autonomous trends," Research Memorandum 036, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  2. repec:dgr:uvatin:2009099 is not listed on IDEAS
  3. Mahapatro, Sandhya Rani, 2013. "Declining Trends in Female Labour Force Participation in India: Evidence from NSSO," MPRA Paper 44373, University Library of Munich, Germany.
  4. Vendrik Maarten & Cörvers Frank, 2009. "Male and female labour force participation: the role of dynamic adjustments to changes in labour demand, government policies and autonomous trends," ROA Research Memorandum 013, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  5. Benito, Andrew & Bunn, Philip, 2011. "Understanding labour force participation in the United Kingdom," Bank of England Quarterly Bulletin, Bank of England, vol. 51(1), pages 36-42.
  6. Sebastian Klüsener & Karel Neels & Michaela Kreyenfeld, 2013. "Social norms, family policies, and fertility trends: insights from a comparative study on the German-speaking region in Belgium," MPIDR Working Papers WP-2013-003, Max Planck Institute for Demographic Research, Rostock, Germany.
  7. Cipollone, Angela & Patacchini, Eleonora & Vallanti, Giovanna, 2012. "Women’s Labour Market Performance in Europe: Trends and Shaping Factors," CEPS Papers 7329, Centre for European Policy Studies.
  8. Cipollone, Angela & Patacchini, Eleonora & Vallanti, Giovanna, 2013. "Women Labor Market Participation in Europe: Novel Evidence on Trends and Shaping Factors," IZA Discussion Papers 7710, Institute for the Study of Labor (IZA).

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