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Declining labor force attachment and downward trends in unemployment and participation

The US labor market witnessed two apparently unrelated secular movements in the last 30 years: a decline in unemployment between the early 1980s and the early 2000s, and a decline in participation since the early 2000s. Using CPS micro data and a stock- flow accounting framework, we show that a substantial, and hitherto unnoticed, factor behind both trends is a decline in the share of nonparticipants who are at the margin of participation. A lower share of marginal nonparticipants implies a lower unemployment rate, because marginal nonparticipants enter the labor force mostly through unemployment, while other nonparticipants enter the labor force mostly through employment.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/1397.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1397.

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Date of creation: Oct 2013
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Handle: RePEc:upf:upfgen:1397
Contact details of provider: Web page: http://www.econ.upf.edu/

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