The Ins and Outs of Labor Force Participation

18 Pages Posted: 28 Jan 2019

See all articles by Regis Barnichon

Regis Barnichon

Federal Reserve Bank of San Francisco

Date Written: January 2019

Abstract

In this note, I decompose LFPR movements into the contributions of the inflows into participation --the Ins-- and the outflows out of participation --the Outs--. Contrary to conventional wisdom, movements in the outflow rate account for most of the variation of the labor force participation rate: the LFPR increases in tight labor markets because fewer workers leave the labor force, not because more nonparticipants enter. The cyclicality of the outflow rate is in turn mechanically driven by a composition effect: in tight labor markets, job seekers find jobs faster and as a result become less likely to leave the labor force.

Suggested Citation

Barnichon, Regis, The Ins and Outs of Labor Force Participation (January 2019). CEPR Discussion Paper No. DP13481. Available at SSRN: https://ssrn.com/abstract=3324216

Regis Barnichon (Contact Author)

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

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