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Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
A cohort-based model of labor force participation
Bruce C. Fallick
Jonathan F. Pingle
Abstract

The probability that an individual participates in the labor force declines precipitously beyond age 50. This feature of labor supply suggests that ongoing shifts in the age distribution of the population will put substantial downward pressure on the aggregate labor force participation rate. However, the aggregate rate is also influenced by trends within age groups. Neglecting to model both within-group influences and shifting population shares will doom any estimate of aggregate labor supply. We develop a model that identifies birth cohorts' propensities to participate, uses these propensities to derive age-specific trends in participation rates, and explicitly incorporates the influence of shifting population shares in estimating aggregate labor force participation.


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Bruce C. Fallick & Jonathan F. Pingle, A cohort-based model of labor force participation, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2007-09, 2006.
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Keywords: Labor supply ; Labor market ; Labor economics
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