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Persistence effects in labor force participation

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Abstract

This paper examines empirically two facets of labor force participation dynamics that imply quite different interpretations of labor market fluctuations. The first, which underlies equilibrium business cycle models, is that workers time their participation to coincide with periods of high real wages. The second, which implies the existence of involuntary unemployment during cyclical downturns, is that workers' current labor force status is heavily influenced by their work experience in the recent past. The authors' results suggest that these persistence effects are a key feature of labor force behavior, particularly for teenagers, adult women, and older men. In contrast, very little evidence could be found to support the intertemporal substitution hypothesis.
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  • Robert S. Gay & William L. Wascher, 1985. "Persistence effects in labor force participation," Working Paper Series / Economic Activity Section 44, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgwe:44
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    2. Julie L. Hotchkiss & John C. Robertson, 2006. "Asymmetric labor force participation decisions over the business cycle: evidence from U.S. microdata," FRB Atlanta Working Paper 2006-08, Federal Reserve Bank of Atlanta.

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