The link between unemployment and labor force participation rates in Japan: A regional perspective

De-Chih Liu

Japan and the World Economy, 2014, vol. 30, issue C, 52-58

Abstract: This paper explores the co-integrating relationship between unemployment and the labor force participation rate in Japan from a regional perspective. The univariate co-integration tests indicate that the “no co-integration” hypothesis cannot be rejected in Northern-Kanto, Hokuriku and Kyusyu. Because the univariate co-integration approach might suffer from low power we employed a panel version of the co-integration test recently developed by Westerlund (2006) that also considers the possibility of multiple structural breaks in the level of individual co-integrating equations. The test results lend support for an overwhelmingly long-run relationship between the two variables across regions. Accordingly, this finding is not in line with the unemployment invariance hypothesis. As a result a nationally orientated employment policy aimed at improving the unemployment and labor force participation rates might be preferred over a region-specific employment policy in Japan.

Keywords: Unemployment invariance hypothesis; Unemployment; Labor force participation (search for similar items in EconPapers)
JEL-codes: E24 J40 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:30:y:2014:i:c:p:52-58

DOI: 10.1016/j.japwor.2014.02.004

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