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A cohort-based model of labor force participation

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Author Info

  • Bruce Fallick
  • Jonathan Pingle

Abstract

The probability that an individual participates in the labor force declines precipitously beyond age 50. This feature of labor supply suggests that ongoing shifts in the age distribution of the population will put substantial downward pressure on the aggregate labor force participation rate. However, the aggregate rate is also influenced by trends within age groups. Neglecting to model both within-group influences and shifting population shares will doom any estimate of aggregate labor supply. We develop a model that identifies birth cohorts' propensities to participate, uses these propensities to derive age-specific trends in participation rates, and explicitly incorporates the influence of shifting population shares in estimating aggregate labor force participation.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2007-09.

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Date of creation: 2006
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Handle: RePEc:fip:fedgfe:2007-09

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Related research

Keywords: Labor supply ; Labor market ; Labor economics;

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References

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  1. Gustavsson, Magnus & Osterholm, Par, 2006. "The informational value of unemployment statistics: A note on the time series properties of participation rates," Economics Letters, Elsevier, vol. 92(3), pages 428-433, September.
  2. James Poterba & Joshua Rauh & Steven Venti & David Wise, 2006. "Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth," NBER Working Papers 12597, National Bureau of Economic Research, Inc.
  3. David S. Loughran & Steven Haider, 2007. "Do the Elderly Respond to Taxes on Earnings? Evidence from the Social Security Retirement Earnings Test," Working Papers 223-1, RAND Corporation Publications Department.
  4. Daniel Aaronson & Daniel Sullivan, 2002. "Growth in worker quality," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Feb.
  5. Julie L. Hotchkiss, 2005. "What’s up with the decline in female labor force participation?," Working Paper 2005-18, Federal Reserve Bank of Atlanta.
  6. Marianne Baxter & Robert G. King, 1995. "Measuring Business Cycles Approximate Band-Pass Filters for Economic Time Series," NBER Working Papers 5022, National Bureau of Economic Research, Inc.
  7. Claudia Goldin, 2006. "The Quiet Revolution that Transformed Women's Employment, Education, and Family," NBER Working Papers 11953, National Bureau of Economic Research, Inc.
  8. Jaeger, David A, 1997. "Reconciling the Old and New Census Bureau Education Questions: Recommendations for Researchers," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 300-309, July.
  9. Jonathan F. Pingle, 2006. "Social Security's delayed retirement credit and the labor supply of older men," Finance and Economics Discussion Series 2006-37, Board of Governors of the Federal Reserve System (U.S.).
  10. 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.
  11. Frees, Edward W., 2003. "Stochastic forecasting of labor force participation rates," Insurance: Mathematics and Economics, Elsevier, vol. 33(2), pages 317-336, October.
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Citations

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Cited by:
  1. Bruce Fallick & Charles Fleischman & Jonathan Pingle, 2010. "The Effect of Population Aging on the Aggregate Labor Market," NBER Chapters, in: Labor in the New Economy, pages 377-417 National Bureau of Economic Research, Inc.
  2. Mark E Schweitzer & Murat Tasci, 2013. "What constitutes substantial employment gains in today’s labor market?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jun.
  3. Bruce Fallick & Jonathan Pingle, 2007. "The effect of population aging on aggregate labor supply in the United States," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 52.
  4. Kudlyak, Marianna, 2013. "A Cohort Model of Labor Force Participation," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 25-43.
  5. Julie L. Hotchkiss, 2009. "Decomposing changes in the aggregate labor force participation rate," Working Paper 2009-06, Federal Reserve Bank of Atlanta.
  6. Regis Barnichon & Christopher J. Nekarda, 2013. "The ins and outs of forecasting unemployment: Using labor force flows to forecast the labor market," Finance and Economics Discussion Series 2013-19, Board of Governors of the Federal Reserve System (U.S.).
  7. repec:dgr:uvatin:2009099 is not listed on IDEAS
  8. repec:fip:fedreq:y:2011:i:4q:p:359-387:n:vol.97no.4 is not listed on IDEAS
  9. Marianna Kudlyak & Thomas A. Lubki & Jonathan Tompkins, 2011. "Accounting for the non-employment of U.S. men, 1968-2010," Economic Quarterly, Federal Reserve Bank of Richmond, issue 4Q, pages 359-387.
  10. Balleer, Almut & Gómez-Salvador, Ramón & Turunen, Jarkko, 2009. "Labour force participation in the euro area: a cohort based analysis," Working Paper Series 1049, European Central Bank.
  11. Julie L. Hotchkiss, 2009. "Changes in the aggregate labor force participation rate," Economic Review, Federal Reserve Bank of Atlanta.

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