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A new look at the discouragement and the added worker hypotheses : applying a trend-cycle decomposition to unemployment

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Author Info

  • Fuchs, Johann

    ()
    (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

  • Weber, Enzo

    ()
    (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])

Abstract

"Using German data this study applies an unobserved-components approach to disentangle the unemployment rate into a (stochastic) trend and a cyclical part and to estimate the influence of these components on labor participation. The persistent trend component of unemployment, which triggers permanent reactions of the workers, is likely connected to a structural discouragement effect. The cyclical component, which reflects more fluctuant changes, can be linked to a shorter-term added worker effect. By splitting up the participation effect of changes in the unemployment rate our analysis differs profoundly from previous studies that present the net of both or only a single effect. For the total working population both a discouragement and an added worker effect were identified. In detailed analyses we find that the former was relevant for older workers, whereas the latter especially concerns prime aged and younger females. As many OECD countries are facing an ageing population as well as rising importance of women in the labor market, these age- and gender-specific results might be of particular interest." (Author's abstract, IAB-Doku) ((en))

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Bibliographic Info

Paper provided by Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] in its series IAB Discussion Paper with number 201301.

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Length: 10 pages
Date of creation: 12 Feb 2013
Date of revision:
Publication status: published in: Applied Economics Letters, Vol. 20, No. 15 (2013), p. 1374-1378
Handle: RePEc:iab:iabdpa:201301

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Keywords: Arbeitslosenquote; Konjunkturzyklus; Erwerbsbeteiligung; Erwerbsverhalten; Beschäftigungseffekte; Persistenz; stille Reserve; Erwerbsquote; Erwerbsbevölkerung; geschlechtsspezifische Faktoren; altersspezifische Faktoren;

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References

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  1. Österholm, Pär, 2009. "Unemployment and Labour Force Participation in Sweden," Working Paper 113, National Institute of Economic Research.
  2. Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January.
  3. James C. Morley & Charles R. Nelson & Eric Zivot, 2003. "Why Are the Beveridge-Nelson and Unobserved-Components Decompositions of GDP So Different?," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 235-243, May.
  4. Schmerer, Hans-Jörg, 2012. "Skill-biased labor market reforms and international competitiveness," IAB Discussion Paper 201224, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  5. Stops, Michael, 2012. "Job matching across occupational labour markets," IAB Discussion Paper 201227, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  6. Giuseppe Carone & Declan Costello & Nuria Diez Guardia & Gilles Mourre & Bartosz Przywara & Aino Salomaki, 2005. "The economic impact of ageing populations in the EU25 Member States," European Economy - Economic Papers 236, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  7. Tano, Doki K., 1993. "The added worker effect : A causality test," Economics Letters, Elsevier, vol. 43(1), pages 111-117.
  8. Damon Clark, 2011. "Do Recessions Keep Students in School? The Impact of Youth Unemployment on Enrolment in Post‐compulsory Education in England," Economica, London School of Economics and Political Science, vol. 78(311), pages 523-545, 07.
  9. 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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Cited by:
  1. Pauser, Johannes, 2013. "Capital mobility, imperfect labour markets, and the provision of public goods," IAB Discussion Paper 201309, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. Mönnig, Anke & Zika, Gerd & Maier, Tobias, 2013. "Trade and qualification : linking qualification needs to Germany's export flows," IAB Discussion Paper 201307, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  3. Vallizadeh, Ehsan & Muysken, Joan & Ziesemer, Thomas, 2013. "Migration, unemployment and skill downgrading : a specific-factors approach," IAB Discussion Paper 201313, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  4. Werner, Daniel, 2013. "New insights into the development of regional unemployment disparities," IAB Discussion Paper 201311, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  5. Weber, Enzo & Zika, Gerd, 2013. "Labour market forecasting : is disaggregation useful?," IAB Discussion Paper 201314, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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