IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v49y2017i60p5971-5982.html
   My bibliography  Save this article

Long-term unemployment and labour force participation: a decomposition of unemployment to test for the discouragement and added worker hypotheses

Author

Listed:
  • Johann Fuchs
  • Enzo Weber

Abstract

We sharpen tests for ‘discouragement’ and ‘added worker’ effects by splitting the explanatory variable – the unemployment rate – into a short-term component and a long-term component. While short-term unemployment (STU) might not result in additional workers on a large scale, long-term unemployment (LTU) reduces household income more, increasing the need for additional income. On the other hand, it may discourage older workers for psychological and sociological reasons. Applying our model to the German labour market, these hypotheses could be confirmed. Even for men, about whom only a few empirical studies on this issue are available, distinguishing between STU and LTU reveals added worker as well as discouragement effects.

Suggested Citation

  • Johann Fuchs & Enzo Weber, 2017. "Long-term unemployment and labour force participation: a decomposition of unemployment to test for the discouragement and added worker hypotheses," Applied Economics, Taylor & Francis Journals, vol. 49(60), pages 5971-5982, December.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:60:p:5971-5982
    DOI: 10.1080/00036846.2017.1368991
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2017.1368991
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036846.2017.1368991?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09j0h18ghk9 is not listed on IDEAS
    2. Maarten van Ham & Clara H. Mulder & Pieter Hooimeijer, 2001. "Local Underemployment and the Discouraged Worker Effect," Urban Studies, Urban Studies Journal Limited, vol. 38(10), pages 1733-1751, September.
    3. Zapf, Ines, 2015. "Who profits from working-time accounts? : empirical evidence on the determinants of working-time accounts on the employers' and employees' side," IAB-Discussion Paper 201523, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Hecht, Veronika, 2015. "Location choice of German multinationals in the Czech Republic : the importance of agglomeration economies," IAB-Discussion Paper 201519, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Agbola, F. W., 2005. "Integrating Hidden Unemployment in the Measurement of Unemployment in Selected OECD Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(2).
    6. Kollmann, Robert, 1994. "Hidden unemployment a search-theoretic interpretation," Economics Letters, Elsevier, vol. 46(4), pages 351-355, December.
    7. Jürgen Wiemers, 2015. "Endogenizing take-up of social assistance in a microsimulation model. A case study for Germany," International Journal of Microsimulation, International Microsimulation Association, vol. 8(2), pages 4-27.
    8. Susanne Wanger & Roland Weigand & Ines Zapf, 2016. "Measuring hours worked in Germany – Contents, data and methodological essentials of the IAB working time measurement concept [Die Berechnung der geleisteten Arbeitsstunden in Deutschland – Inhalte,," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(3), pages 213-238, November.
    9. Österholm, Pär, 2010. "Unemployment and labour-force participation in Sweden," Economics Letters, Elsevier, vol. 106(3), pages 205-208, March.
    10. repec:zbw:rwirep:0484 is not listed on IDEAS
    11. Dietz, Martin & Walwei, Ulrich, 2011. "Germany - no country for old workers?," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 44(4), pages 363-376.
    12. Juan Prieto-Rodriguez & Cesar Rodriguez-Gutierrez, 2000. "The added worker effect in the Spanish case," Applied Economics, Taylor & Francis Journals, vol. 32(15), pages 1917-1925.
    13. Umkehrer, Matthias, 2015. "The impact of changing youth employment patterns on future wages," IAB-Discussion Paper 201531, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    14. Veronika Hecht, 2017. "Location choice of German multinationals in the Czech Republic," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(4), pages 593-623, October.
    15. Kye Woo LEE & Kisuk CHO, 2005. "Female labour force participation during economic crises in Argentina and the Republic of Korea," International Labour Review, International Labour Organization, vol. 144(4), pages 423-450, December.
    16. Cem Başlevent & Özlem Onaran, 2003. "Are Married Women in Turkey More Likely to Become Added or Discouraged Workers?," LABOUR, CEIS, vol. 17(3), pages 439-458, September.
    17. Dietrich, Hans, 2015. "Jugendarbeitslosigkeit aus einer europäischen Perspektive : theoretische Ansätze, empirische Konzepte und ausgewählte Befunde," IAB-Discussion Paper 201524, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    18. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09j0h18ghk9 is not listed on IDEAS
    19. Briscoe, G. & Wilson, R., 1992. "Forecasting economic activity rates," International Journal of Forecasting, Elsevier, vol. 8(2), pages 201-217, October.
    20. Weigand Roland & Wanger Susanne & Zapf Ines, 2018. "Factor Structural Time Series Models for Official Statistics with an Application to Hours Worked in Germany," Journal of Official Statistics, Sciendo, vol. 34(1), pages 265-301, March.
    21. repec:bla:econom:v:58:y:1991:i:230:p:173-87 is not listed on IDEAS
    22. Julia Bredtmann & Sebastian Otten & Christian Rulff, 2014. "Husband’s Unemployment and Wife’s Labor Supply – The Added Worker Effect across Europe," Economics Working Papers 2014-13, Department of Economics and Business Economics, Aarhus University.
    23. Sabine Klinger & Thomas Rothe, 2012. "The Impact of Labour Market Reforms and Economic Performance on the Matching of the Short‐term and the Long‐term Unemployed," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(1), pages 90-114, February.
    24. Martin J. O’Brien, 2000. "Older male labour force participation: the role of social security and hidden unemployment," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 4(3), pages 206-223, September.
    25. Bauer, Anja, 2015. "Reallocation patterns across occupations," IAB-Discussion Paper 201526, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    26. Benati, Luca, 2001. "Some empirical evidence on the 'discouraged worker' effect," Economics Letters, Elsevier, vol. 70(3), pages 387-395, March.
    27. Wiemers, Jürgen, 2015. "Endogenizing take-up of social assistance in a microsimulation model : a case study for Germany," IAB-Discussion Paper 201520, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    28. Blundell, Richard & Ham, John & Meghir, Costas, 1998. "Unemployment, discouraged workers and female labour supply," Research in Economics, Elsevier, vol. 52(2), pages 103-131, June.
    29. Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January.
    30. Tano, Doki K., 1993. "The added worker effect : A causality test," Economics Letters, Elsevier, vol. 43(1), pages 111-117.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maridueña-Larrea, Ángel & Martín-Román, Ángel L., 2023. "The asymmetric cyclical behaviour of female labour force participation in Latin America," MPRA Paper 117408, University Library of Munich, Germany.
    2. Nicholas Apergis & Ibrahim Arisoy, 2017. "Unemployment and labor force participation across the US States: new evidence from panel data," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 67(4), pages 45-84, October-D.
    3. Möller, Joachim, 2016. "Lohnungleichheit: Gibt es eine Trendwende? (German wage inequality: Is there a trend reversal?)," IAB-Discussion Paper 201609, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Gehrke, Britta & Weber, Enzo, 2018. "Identifying asymmetric effects of labor market reforms," European Economic Review, Elsevier, vol. 110(C), pages 18-40.
    5. Bod’a, Martin & Považanová, Mariana, 2021. "Output-unemployment asymmetry in Okun coefficients for OECD countries," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 307-323.
    6. Maridueña-Larrea, Ángel & Martín-Román, Ángel L., 2023. "The unemployment invariance hypothesis and the implications of added and discouraged worker effects in Latin America," MPRA Paper 115966, University Library of Munich, Germany.
    7. Martín-Román, Ángel L., 2022. "Beyond the added-worker and the discouraged-worker effects: the entitled-worker effect," Economic Modelling, Elsevier, vol. 110(C).
    8. Martina Rengers & Johann Fuchs, 2022. "Stille Reserve in Deutschland: Gemeinsamkeiten und Unterschiede zweier Konzepte [Hidden labour force in Germany: similarities and differences between two concepts]," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 16(3), pages 189-230, December.
    9. Jan Gromadzki, 2019. "The Added Worker Effect, Employment Contracts, and the Reasons for the Wife’s Inactivity," IBS Working Papers 02/2019, Instytut Badan Strukturalnych.
    10. Krzysztof Bartosik, 2020. "Świadczenia pieniężne na rzecz dzieci a podaż pracy kobiet w krajach OECD," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 83-110.
    11. Jajati Keshari Parida & Shiba Shankar Pattayat & Sher Verick, 2023. "Why is the size of discouraged labour force increasing in India?," Economic Change and Restructuring, Springer, vol. 56(5), pages 3601-3630, October.
    12. Fuchs, Johann & Weber, Brigitte, 2021. "Neue Schätzungen für die Stille Reserve - erstmalig Anwendung des IAB-Konzepts auf Gesamtdeutschland," IAB-Forschungsbericht 202106, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klinger, Sabine & Weber, Enzo, 2016. "Detecting unemployment hysteresis: A simultaneous unobserved components model with Markov switching," Economics Letters, Elsevier, vol. 144(C), pages 115-118.
    2. Eckman, Stephanie & Kreuter, Frauke, 2015. "Misreporting to looping questions in surveys : recall, motivation and burden," IAB-Discussion Paper 201529, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Jajati Keshari Parida & Shiba Shankar Pattayat & Sher Verick, 2023. "Why is the size of discouraged labour force increasing in India?," Economic Change and Restructuring, Springer, vol. 56(5), pages 3601-3630, October.
    4. Johann Fuchs, 2014. "Der Einfluss von Hartz IV auf die westdeutsche Stille Reserve – Ergebnisse auf Basis unterschiedlicher methodischer Ansätze," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 8(1), pages 33-48, June.
    5. Fuchs, Johann & Weber, Brigitte, 2021. "Neue Schätzungen für die Stille Reserve - erstmalig Anwendung des IAB-Konzepts auf Gesamtdeutschland," IAB-Forschungsbericht 202106, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Christoph, Bernhard, 2015. "Empirische Maße zur Erfassung von Armut und materiellen Lebensbedingungen : Ansätze und Konzepte im Überblick," IAB-Discussion Paper 201525, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    7. Mendolicchio, C. & Pietra, T., 2016. "Endowment redistribution and Pareto improvements in GEI economies," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 181-190.
    8. Emilio Congregado & Ewa Galecka-Burdziak & Antonio A. Golpe & Robert Pater, 2021. "Separating aggregate discouraged and added worker effects: the case of a former transition country," Oeconomia Copernicana, Institute of Economic Research, vol. 12(3), pages 729-760, September.
    9. Johann Fuchs & Enzo Weber, 2013. "A new look at the discouragement and the added worker hypotheses: applying a trend--cycle decomposition to unemployment," Applied Economics Letters, Taylor & Francis Journals, vol. 20(15), pages 1374-1378, October.
    10. Zapf, Ines, 2015. "Who profits from working-time accounts? : empirical evidence on the determinants of working-time accounts on the employers' and employees' side," IAB-Discussion Paper 201523, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    11. Weigand Roland & Wanger Susanne & Zapf Ines, 2018. "Factor Structural Time Series Models for Official Statistics with an Application to Hours Worked in Germany," Journal of Official Statistics, Sciendo, vol. 34(1), pages 265-301, March.
    12. Aysit Tansel & Zeynel Abidin Ozdemir, 2018. "Unemployment invariance hypothesis, added and discouraged worker effects in Canada," International Journal of Manpower, Emerald Group Publishing Limited, vol. 39(7), pages 929-936, October.
    13. Dietrich, Hans, 2015. "Jugendarbeitslosigkeit aus einer europäischen Perspektive : theoretische Ansätze, empirische Konzepte und ausgewählte Befunde," IAB-Discussion Paper 201524, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    14. Aysit Tansel & Zeynel Abidin Ozdemir, 2016. "Unemployment Invariance Hypothesis, Added and Discouraged Worker Effects in Canada?," ERC Working Papers 1717, ERC - Economic Research Center, Middle East Technical University, revised Dec 2017.
    15. Ayhan, Sinem H., 2015. "Evidence of Added Worker Effect from the 2008 Economic Crisis," IZA Discussion Papers 8937, Institute of Labor Economics (IZA).
    16. Macchioni Giaquinto, Annarita & Jones, Andrew M. & Rice, Nigel & Zantomio, Francesca, 2021. "Labour supply and informal care responses to health shocks within couples: evidence from the UKHLS," GLO Discussion Paper Series 806, Global Labor Organization (GLO).
    17. Julia Bredtmann & Sebastian Otten & Christian Rulff, 2014. "Husband’s Unemployment and Wife’s Labor Supply – The Added Worker Effect across Europe," Economics Working Papers 2014-13, Department of Economics and Business Economics, Aarhus University.
    18. Fackler, Daniel & Hank, Eva, 2016. "Who buffers income losses after job displacement? The role of alternative income sources, the family, and the state," IWH Discussion Papers 28/2016, Halle Institute for Economic Research (IWH).
    19. John K. Dagsvik & Tom Kornstad & Terje Skjerpen, 2016. "Discouraged worker effects and barriers against employment for immigrant and non-immigrant women," Discussion Papers 845, Statistics Norway, Research Department.
    20. Sinem H. Ayhan, 2018. "Married women’s added worker effect during the 2008 economic crisis—The case of Turkey," Review of Economics of the Household, Springer, vol. 16(3), pages 767-790, September.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:49:y:2017:i:60:p:5971-5982. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.