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The dynamics of labor force participation: Is all quiet on the Appalachian front?

Author

Listed:
  • Josh Beverly

    (Hamline University)

  • Shamar L. Stewart

    (Virginia Tech)

  • Clinton L. Neill

    (Cornell University)

Abstract

This study examines the divergence and synchronicity of labor force participation rate (LFPR) dynamics across the USA. Using a dynamic factor model with time-varying stochastic volatility, we decompose each state’s LFPR into a national, regional, and state-specific latent factor. We find significant time variation in our factors and heterogeneous labor market responses and relative sensitivities. Our results show that, save for West Virginia, there is no strong Appalachian regional component, and instead, the national and state-specific components explain much of the variation in state LFPRs. Our results suggest the need for more targeted and localized labor market policies during periods of divergence in LFPRs (i.e., recessions and shocks) and federal policies during national economic booms or periods of recovery.

Suggested Citation

  • Josh Beverly & Shamar L. Stewart & Clinton L. Neill, 2023. "The dynamics of labor force participation: Is all quiet on the Appalachian front?," Empirical Economics, Springer, vol. 65(6), pages 2867-2898, December.
    • Handle: RePEc:spr:empeco:v:65:y:2023:i:6:d:10.1007_s00181-023-02447-1
    DOI: 10.1007/s00181-023-02447-1
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    Keywords

    Labor force participation; Dynamic factor model (DFM); Stochastic volatility; Appalachia; Bayesian analysis; Time series analysis;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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