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The UK labour force participation rate: business cycle and trend influences

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  • Mark Schweitzer
  • David Tinsley

Abstract

In this paper the extent to which recent patterns in UK labour force participation have been influenced by trend and business cycle factors is investigated. A modelling strategy is proposed that pools the available micro and aggregate-level data, to produce a mutually consistent model of the trend and cyclical components of participation. A significant procyclical pattern is established, but some distinct trend influences on the participation rate are also identified. The approach allows for the construction of forecasts, which would be a useful input into the sort of macroeconometric models used by policymakers. The model outperforms some conventional macroeconometric forecasts in out-of-sample forecast tests.

Suggested Citation

  • 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.
    • Handle: RePEc:boe:boeewp:228
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    File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2004/WP228.pdf
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    References listed on IDEAS

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    1. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-589, August.
    2. Briscoe, G. & Wilson, R., 1992. "Forecasting economic activity rates," International Journal of Forecasting, Elsevier, vol. 8(2), pages 201-217, October.
    3. Brian Bell & James Smith, 2002. "On gross worker flows in the United Kingdom: evidence from the Labour Force Survey," Bank of England working papers 160, Bank of England.
    4. Chinhui Juhn & Kevin Murphy & Robert Topel, 2002. "Current Unemployment, Historically Contemplated," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 79-136.
    5. Brian Bell & James Smith, 2004. "Health, disability insurance and labour force participation," Bank of England working papers 218, Bank of England.
    6. Harvey, A C & Jaeger, A, 1993. "Detrending, Stylized Facts and the Business Cycle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(3), pages 231-247, July-Sept.
    7. Blundell, Richard & Meghir, Costas & Symons, Elizabeth & Walker, Ian, 1988. "Labour supply specification and the evaluation of tax reforms," Journal of Public Economics, Elsevier, vol. 36(1), pages 23-52, June.
    8. Joanne Cutler & Kenny Turnbull, 2001. "A Disaggregated Approach to Modelling UK Labour Force Participation," Discussion Papers 04, Monetary Policy Committee Unit, Bank of England.
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    Cited by:

    1. Wei Jiang, 2014. "Tax Reforms in Search-and-Matching Models with Heterogeneous Agents," Studies in Economics 1414, School of Economics, University of Kent.

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