Is labour force participation independent of unemployment? A panel analysis for high-income countries

Abstract

Purpose

We test the pertinence of the unemployment invariance hypothesis (UIH) for a set of Organisation for Economic Co-operation and Development countries.

Design/methodology/approach

We empirically investigate the nexus between unemployment and labour force participation employing structural vector autoregressive methods for panel data.

Findings

We find that shocks in unemployment produce long-lasting, negative effects on participation, testifying to a discouraged worker effect.

Originality/value

Our results do not support the validity of the UIH in high-income economies. This has relevant implications for policy making and macroeconomic models.

Citation

Paternesi Meloni, W. (2024), "Is labour force participation independent of unemployment? A panel analysis for high-income countries", International Journal of Manpower, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJM-10-2022-0474