Labour force participation and business cycle fluctuations: a comparative analysis of Europe, Japan and the United States

This paper investigates the cyclical responsiveness of participation in the labour force. We examine systems of equations, disaggregated by age and gender, for France, Japan, Sweden and the US, using data from the OECD Labour Force Statistics, 1970–1995. We use measures of country specific business cycles following Harvey and Jaeger (1993) and test for asymmetric responses of participation to expansionary and contractionary phases of the cycle. Our results show that discouraged worker effects are prevalent. These effects are strongest in the downward phase of the cycle and are essentially a female phenomenon, with a particular concentration among 45–54 year olds.