Driving Forces Behind Changes in the Aggregate Labour Force Participation in Hungary

Gábor Kátay and Benedek Nobilis

No 2009/5, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: This paper proposes a simple and transparent methodology for decomposing changes in the aggregate labour force participation rate over time into changes in the labour force participation behaviour of different population groups and changes in each group’s population share. Unlike traditional decomposition methods based only on demographic factors, our approach also identifies the contribution of all major factors that can account for the developments in the labour force participation such as change in the general educational level or the most important social welfare programs. An application on Hungarian labour force data shows that the selected variables explain the evolution of the participation rate quite well – especially on the long term. More specifically, our results indicate that the rising labour supply since ’97 in Hungary was principally driven by the increasing average level of education and, most importantly, the gradual tightening of the conditions of old-age retirement. The other estimated effects are also in line with our expectations. Given that the residual term not captured by the model has no visible trend but fluctuates with economic cycles, the explained part can also be interpreted as an indicator of the underlying labour supply.

Keywords: labour force participation; decomposition; demographic change; schooling; social transfers. (search for similar items in EconPapers)
JEL-codes: J11 J21 J22 J26 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009
New Economics Papers: this item is included in nep-age and nep-lab
References: Add references at CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.mnb.hu/letoltes/wp-2009-5.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnb:wpaper:2009/5

Access Statistics for this paper

More papers in MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary) Contact information at EDIRC.
Bibliographic data for series maintained by Lorant Kaszab ( this e-mail address is bad, please contact ).