Analysis of the discouraged worker phenomenon. Evidence from micro data

In this paper we analyze labor force participation with particular reference to the discouraged worker effect. The theoretical point of departure is a simple 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. With suitable assumptions about unobserved and observed heterogeneity we derive an empirical model for the probability that the worker will be unemployed or employed as a function of the probability of getting a job, given that the worker searches for work. The model is estimated on Norwegian micro-data consisting of independent cross sections over 15 years. The results indicate that there is a substantial discouraged worker effect.

[1]  M. Vecchi,et al.  Labour force participation and the business cycle: a comparative analysis of France, Japan, Sweden and the United States , 2001 .

[2]  J. Dagsvik,et al.  Female Labour Supply and the Tax Benefit System in France , 1988 .

[3]  John C. Ham,et al.  Unemployment and Female Labour Supply , 1987 .

[4]  Annegrete Bruvoll,et al.  Transboundary environmental policy effects: Markets and emission leakages , 2004 .

[5]  D. Bremmer,et al.  EVIDENCE FROM MICRO DATA , 2004 .

[6]  Tamim A. Bayoumi.  Financial Deregulation and Household Saving , 1992 .

[7]  T. Tachibanaki,et al.  Labour supply and unemployment in Japan , 1991 .

[8]  G. M. Gallarotti,et al.  It pays to be green: The managerial incentive structure and environmentally sound strategies , 1995 .

[9]  John K. Dagsvik,et al.  Sectoral labour supply, choice restrictions and functional form , 2006 .

[10]  John C. Ham,et al.  Unemployment, discouraged workers and female labour supply , 1998 .

[11]  Dale T. Mortensen,et al.  Earnings, Unemployment, and the Allocation of Time Over Time , 1984 .

[12]  Jeffrey A. Dubin.  Consumer Durable Choice and the Demand for Electricity , 1985 .

[13]  M. Greaker.  Industrial Competitiveness and Diffusion of New Pollution Abatement Technology - a new look at the Porter-hypothesis , 2004 .

[14]  David Gee,et al.  LATE LESSONS FROM EARLY WARNINGS , 2004 .

[15]  R. Blundell,et al.  Unemployment, search and labour supply , 1987 .

[16]  D. McFadden.  Econometric analysis of qualitative response models , 1984 .

[17]  Luca Benati.  Some empirical evidence on the ‘discouraged worker’ effect , 2001 .

[18]  Arvid Raknerud,et al.  A Method for Improved Capital Measurement By Combining Accounts and Firm Investment Data , 2007 .

[19]  D. J. Strauss,et al.  Some results on random utility models , 1979 .

[20]  J. Heckman.  Sample selection bias as a specification error , 1979 .

[21]  C. D. Long,et al.  The Labor Force under Changing Income and Employment , 1959 .

[22]  Cem Başlevent,et al.  Are Married Women in Turkey More Likely to Become Added or Discouraged Workers? , 2003 .

[23]  S. Lippman,et al.  Chapter 6 The economics of uncertainty: Selected topics and probabilistic methods , 1981 .

[24]  K. R. Wangen,et al.  Some fundamental problems in Becker, Grossman and Murphy's implementation of rational addiction theory , 2004 .

[25]  Ronald G. Ehrenberg,et al.  Modern Labor Economics: Theory and Public Policy. , 1984 .