Is labour force participation independent of unemployment? A panel analysis for high-income countries

Walter Paternesi Meloni

International Journal of Manpower, 2024, vol. 45, issue 6, 1191-1208

Abstract: Purpose - We test the pertinence of the unemployment invariance hypothesis (UIH) for a set of Organisation for Economic Co-operation and Development countries. Design/methodology/approach - We empirically investigate the nexus between unemployment and labour force participation employing structural vector autoregressive methods for panel data. Findings - We find that shocks in unemployment produce long-lasting, negative effects on participation, testifying to a discouraged worker effect. Originality/value - Our results do not support the validity of the UIH in high-income economies. This has relevant implications for policy making and macroeconomic models.

Keywords: Unemployment; Participation; Labour market; Unemployment invariance; SVAR; E24; J21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmpps:ijm-10-2022-0474

DOI: 10.1108/IJM-10-2022-0474

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