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A Disaggregated Approach to Modelling UK Labour Force Participation

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  • Joanne Cutler
  • Kenny Turnbull

Abstract

Fluctuations in the labour force participation rate in the short to medium run are an important determinant of the cyclical behaviour of the unemployment rate, and hence wage pressures in the economy. This paper takes a closer look at the cyclical behaviour of labour force participation in the United Kingdom over the last 15 years with a view to producing short term projections for the next two years. We model labour participation rates at a disaggregated level, for males and females separately. Because the trends in male and female participation rates have been quite different, a disaggregated approach is more likely to pick up reliable trends and therefore cyclical variations. We find evidence of procyclical movements in participation rates for both men and women, and the response to changes in the output gap is significant. Conditional on projections for the output gap made at the end of 2000, we estimate that the participation rate will continue to increase - by around +0.2pp over the next two years - but at a slower pace than in the recent past.

Suggested Citation

  • Joanne Cutler & Kenny Turnbull, 2001. "A Disaggregated Approach to Modelling UK Labour Force Participation," Discussion Papers 04, Monetary Policy Committee Unit, Bank of England.
    • Handle: RePEc:mpc:wpaper:04
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    File URL: http://www.bankofengland.co.uk/publications/externalmpcpapers/extmpcpaper0004.pdf
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    References listed on IDEAS

    as
    1. Morgan, Julian, 1996. "What Do Comparisons Of The Last Two Economic Recoveries Tell Us About The UK Labour Market?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 156, pages 80-91, May.
    2. repec:sae:niesru:v:156:y::i:1:p:80-91 is not listed on IDEAS
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    Cited by:

    1. Katarzyna Budnik & Michal Greszta & Michal Hulej & Marcin Kolasa & Karol Murawski & Michal Rot & Bartosz Rybaczyk & Magdalena Tarnicka, 2009. "The new macroeconometric model of the Polish economy," NBP Working Papers 62, Narodowy Bank Polski.
    2. Puigvert Jonathan & Juárez-Torres Miriam, 2019. "Labour Force Participation and the Business Cycle in Mexico," Working Papers 2019-04, Banco de México.
    3. Mark Schweitzer & David Tinsley, 2004. "The UK labour force participation rate: business cycle and trend influences," Bank of England working papers 228, Bank of England.

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