Are Labour Force Participation Rates Non-Stationary? Evidence from 130 Years for G7 Countries
Jakob B. Madsen
University of Copenhagen - Department of Economics
Monash University, Faculty of Business and Economics, Department of Economics
Monash University - Department of Economics
Australian Economic Papers, Vol. 47, Issue 2, pp. 166-189, June 2008
This paper applies a unit root test with a non-linear threshold to examine whether labour force participation rates are mean reverting for G7 countries using annual data over a 130 year period. We find some evidence of mean reversion for just over half the sample; however, this result is sensitive to regime shifts. We also examine whether the labour force participation rate is trend reverting through employing a lagrange multiplier (LM) unit root test with one and two structural breaks in the intercept and slope. The LM unit root test provides no additional evidence in support of stationarity. On the basis of the unit root tests for mean reversion we conclude that there is at best mixed evidence that long-term changes in unemployment rates translate into long-term changes in employment rates and that the unemployment rate is a useful indicator of joblessness.
Number of Pages in PDF File: 24Accepted Paper Series
Date posted: June 18, 2008
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