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A new estimate of discouraged and additional worker effects on labor participation by sex and age in oecd countries

  • Filatriau Olivier
  • Frédéric Reynès

    ()

    (IVM Faculty of Earth and Life Sciences, VU University Amsterdam)

This article proposes a new approach to estimate the effect of the unemployment rate on the labor participation ratio by sex and age. OECD labor participation ratios are estimated within an unobservable component model with the Kalman filter. This allows for treating the trend of the participation rate as a stochastic time varying parameter. This improves the quality of the econometric results by allowing for a better identification of changes in the trend than the most common alternatives using determinist and logistic trends. Moreover the use of cross-section OECD circumvents the problem of the lack of long time series data. We find that OECD labor participation ratio are sensitive to the labor market situation in all sex and age categories and that the discouraged worker effect dominates the additional worker effect although the latter is clearly present for women.

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File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2012-09.pdf
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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2012-09.

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Date of creation: Feb 2012
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Handle: RePEc:fce:doctra:1209
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  1. Maloney, Tim, 1991. "Unobserved Variables and the Elusive Added Worker Effect," Economica, London School of Economics and Political Science, vol. 58(230), pages 173-87, May.
  2. Gerard Cornilleau & Henri Sterdyniak & Guillaume Allegre & Jérôme Creel & Sarah Guillou & Sandrine Levasseur & Catherine Mathieu & Frédéric Reynès & Elena Stancanelli & Vincent Touze, 2008. "Emploi des seniors : les leçons des pays de réussite," Sciences Po publications info:hdl:2441/6405, Sciences Po.
  3. Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January.
  4. Robert J. Gordon, 1996. "The Time-Varying NAIRU and its Implications for Economic Policy," NBER Working Papers 5735, National Bureau of Economic Research, Inc.
  5. Valérie Chauvin & Mathieu Plane, 2001. "2000-2040 : population active et croissance," Revue de l'OFCE, Presses de Sciences-Po, vol. 79(4), pages 235-259.
  6. Tano, Doki K., 1993. "The added worker effect : A causality test," Economics Letters, Elsevier, vol. 43(1), pages 111-117.
  7. Christophe Hurlin & Valérie Mignon, 2007. "Second Generation Panel Unit Root Tests," Working Papers halshs-00159842, HAL.
  8. Kodde, David A., 1988. "Unemployment expectations and human capital formation," European Economic Review, Elsevier, vol. 32(8), pages 1645-1660, October.
  9. Heyer, Eric & Reynes, Frederic & Sterdyniak, Henri, 2007. "Structural and reduced approaches of the equilibrium rate of unemployment, a comparison between France and the United States," Economic Modelling, Elsevier, vol. 24(1), pages 42-65, January.
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