The UK Labour Force Participation Rate: Business Cycle and Trend Influences
Bank of England Working Paper No. 228
37 Pages Posted: 4 Jan 2005
Date Written: September 2004
In this paper the extent to which recent patterns in UK labour force participation have been influenced by trend and business cycle factors is investigated. A modelling strategy is proposed that pools the available micro and aggregate-level data, to produce a mutually consistent model of the trend and cyclical components of participation. A significant procyclical pattern is established, but some distinct trend influences on the participation rate are also identified. The approach allows for the construction of forecasts, which would be a useful input into the sort of macroeconometric models used by policymakers. The model outperforms some conventional macroeconometric forecasts in out-of-sample forecast tests.
Keywords: Participation, business cycles, micro trends
JEL Classification: E32, E24, E27
Suggested Citation: Suggested Citation