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Discussion Papers no. 642

Labor force participation and the discouraged worker effect

This paper analyzes labor force participation with particular reference to the discouraged worker effect. Discouraged workers are those who do not search for work because they view their chances of finding a suitable job as too low. The theoretical point of departure is a search 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. From this framework we derive an empirical model for the probability that the worker will be unemployed or employed as a function of the probability of getting an acceptable job, given that the worker searches for work. The model is estimated on a sample of married and cohabitating women in Norway covering the period from 1988 to 2008. The results show that the discouraged worker effect is substantial. On average, about one third of those who are out of the labor force are discouraged according to our analysis.

Om publikasjonen

Tittel

Labor force participation and the discouraged worker effect

Ansvarlige

John K. Dagsvik, Tom Kornstad, Terje Skjerpen

Serie og -nummer

Discussion Papers no. 642

Utgiver

Statistics Norway

Emne

Discussion Papers

ISSN

1892-753X

Antall sider

48

Målform

Engelsk

Om Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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