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Analysis of the discouraged worker phenomenon. Evidence from micro data

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In this paper we analyze labor force participation with particular reference to the discouraged worker effect. The theoretical point of departure is a simple model where the worker evaluates the expected utility of searching for work, and decides to participate in the labor market if the expected utility of the search exceeds the utility of not working. With suitable assumptions about unobserved and observed heterogeneity we derive an empirical model for the probability that the worker will be unemployed or employed as a function of the probability of getting a job, given that the worker searches for work. The model is estimated on Norwegian micro-data consisting of independent cross sections over 15 years. The results indicate that there is a substantial discouraged worker effect.

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  • John K. Dagsvik & Tom Kornstad & Terje Skjerpen, 2006. "Analysis of the discouraged worker phenomenon. Evidence from micro data," Discussion Papers 453, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:453
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    1. Richard Blundell & John Ham & Costas Meghir, 1989. "Unemployment and Female Labour Supply," Palgrave Macmillan Books, in: Joan Muysken & Chris Neubourg (ed.), Unemployment in Europe, chapter 1, pages 9-36, Palgrave Macmillan.
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    6. Clarence D. Long, 1958. "The Labor Force under Changing Income and Employment," NBER Books, National Bureau of Economic Research, Inc, number long58-1.
    7. 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.
    8. Darby, Julia & Hart, Robert A. & Vecchi, Michela, 2001. "Labour force participation and the business cycle: a comparative analysis of France, Japan, Sweden and the United States," Japan and the World Economy, Elsevier, vol. 13(2), pages 113-133, April.
    9. repec:adr:anecst:y:1988:i:11:p:02 is not listed on IDEAS
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    1. John Dagsvik & Tom Kornstad & Terje Skjerpen, 2013. "Labor force participation and the discouraged worker effect," Empirical Economics, Springer, vol. 45(1), pages 401-433, August.
    2. 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.

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    More about this item

    Keywords

    Discouraged workers; Labor force participation; Random utility modelling;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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