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

  • Mark Schweitzer
  • David Tinsley

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.

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Paper provided by Bank of England in its series Bank of England working papers with number 228.

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Date of creation: Sep 2004
Date of revision:
Handle: RePEc:boe:boeewp:228
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  1. 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.
  2. Brian Bell & James Smith, 2004. "Health, disability insurance and labour force participation," Bank of England working papers 218, Bank of England.
  3. Joanne Cutler & Kenny Turnbull, 2001. "A Disaggregated Approach to Modelling UK Labour Force Participation," Discussion Papers 04, Monetary Policy Committee Unit, Bank of England.
  4. Briscoe, G. & Wilson, R., 1992. "Forecasting economic activity rates," International Journal of Forecasting, Elsevier, vol. 8(2), pages 201-217, October.
  5. 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 231-47, July-Sept.
  6. M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers 1080-96, University of Wisconsin Institute for Research on Poverty.
  7. 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.
  8. 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.
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