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Drivers of Labor Force Participation in Advanced Economies: Macro and Micro Evidence

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  • Grigoli, Francesco
  • Koczan, Zsoka
  • Topalova, Petia

Abstract

Despite significant headwinds from population aging in most advanced economies (AEs), labor force participation rates show remarkably divergent trajectories both across countries and across different groups of workers. Participation increased sharply among prime-age women and, more recently, older workers, but fell among the young and prime-age men. This paper investigates the determinants of these trends using aggregate and individual-level data. We find that the bulk of the dramatic increase in the labor force attachment of prime-age women and older workers in the past three decades can be explained by changes in labor market policies and institutions, structural transformation, and gains in educational attainment. Technological advances such as automation, on the other hand, weighed on the labor supply of prime-age and older workers. In light of the dramatic demographic shifts expected in the coming decades in many AEs, our findings underscore the need to invest in education and training, reform the tax system, reduce early retirement incentives, improve the job-matching process, and help individuals combine family and work life in order to alleviate the pressures from aging on labor supply.

Suggested Citation

  • Grigoli, Francesco & Koczan, Zsoka & Topalova, Petia, 2018. "Drivers of Labor Force Participation in Advanced Economies: Macro and Micro Evidence," GLO Discussion Paper Series 265, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:265
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    Cited by:

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    2. Francesco GrigoliBy & Zsoka Koczan & Petia Topalova, 2021. "A cohort-based analysis of labor force participation for advanced economies [Labor force participation: recent developments and future prospects]," Oxford Economic Papers, Oxford University Press, vol. 73(2), pages 623-643.
    3. Grigoli, Francesco & Koczan, Zsoka & Topalova, Petia, 2020. "Automation and labor force participation in advanced economies: Macro and micro evidence," European Economic Review, Elsevier, vol. 126(C).
    4. Agustin Velasquez & Svetlana Vtyurina, 2019. "How Does Taxation Affect Hours Worked in EU New Member States?," IMF Working Papers 2019/130, International Monetary Fund.
    5. Agovino Massimiliano & Garofalo Antonio & Cerciello Massimiliano, 2019. "Do Local Institutions Affect Labour Market Participation? The Italian Case," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-21, April.
    6. Cipriani, Giam Pietro & Fioroni, Tamara, 2023. "Human Capital and Pensions with Endogenous Fertility and Retirement," IZA Discussion Papers 16029, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    labor force participation; policies; technology; routinization;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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