Analysis of the discouraged worker phenomenon. Evidence from micro data
AbstractIn this paper we analyze labor force participation with particular reference to the discouraged worker effect. The theoretical point of departure is a simple 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 the search exceeds the utility of not working. With suitable assumptions about unobserved and observed heterogeneity we derive an empirical model for the probability that the worker will be unemployed or employed as a function of the probability of getting a job, given that the worker searches for work. The model is estimated on Norwegian micro-data consisting of independent cross sections over 15 years. The results indicate that there is a substantial discouraged worker effect.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 453.
Date of creation: Apr 2006
Date of revision:
Discouraged workers; Labor force participation; Random utility modelling;
Find related papers by JEL classification:
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-20 (All new papers)
- NEP-BEC-2006-05-20 (Business Economics)
- NEP-LAB-2006-05-20 (Labour Economics)
- NEP-UPT-2006-05-20 (Utility Models & Prospect Theory)
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