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

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  • Walter Paternesi Meloni

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.

Suggested Citation

  • Walter Paternesi Meloni, 2024. "Is labour force participation independent of unemployment? A panel analysis for high-income countries," International Journal of Manpower, Emerald Group Publishing Limited, vol. 45(6), pages 1191-1208, February.
    • Handle: RePEc:eme:ijmpps:ijm-10-2022-0474
    DOI: 10.1108/IJM-10-2022-0474
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    More about this item

    Keywords

    Unemployment; Participation; Labour market; Unemployment invariance; SVAR; E24; J21;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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