Unemployment invariance hypothesis and structural breaks in Poland

Congregado, Emilio; Gałecka‐Burdziak, Ewa; Golpe, Antonio A.; Pater, Robert

doi:10.1016/j.jeca.2021.e00198

Cited by 9 publications

(13 citation statements)

References 24 publications

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“…Older workers experienced the most persistent effects, and they were the most susceptible to discouragement. In addition, men were especially likely to experience prolonged periods of discouragement, which confirms previous research conducted for Poland by Congregado et al (2021) using different methods.…”

Section: Discussionsupporting

confidence: 87%

“…We found that the DWE was persistent, and that workers became discouraged for very long periods of time. This may explain why a long-run relationship between the labour force participation rate and the unemployment rate was found in Poland by Congregado et al (2021), and in Sweden by Österholm (2010). This finding may be explained in part by the relatively long mean job search duration in Poland (i.e., 13.7 months with sd.…”

Section: Discussionmentioning

confidence: 98%

“…As well as responding to business cycle fluctuations, workers may either enter the labour market out of necessity (added worker effect), or leave it following a prolonged and unsuccessful job search (discouraged worker effect). The literature usually indicates whether any of these effects prevails (Congegado et al, 2020), or whether there is a cyclical pattern of labour force participation; that is, whether the invariance hypothesis applies 5 (Congregado et al, 2021). However, this approach is a simplification, as these effects tend to play out differently for different fractions of the population.…”

Section: Discussionmentioning

confidence: 99%

“…Moreover, they showed that an unemployment rate higher than 13% led to a discouraged worker effect. Congregado et al (2021) further examined potential nonlinearities in the AWE and the DWE (they allowed the relationship to be time-varying, and to differ by gender groups).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Altavilla et al (2005) tested for non-linearity in the relationship between the female labour force participation rate and the female employment rate using a VEC model and a multivariate Markov-switching model. Congregado et al (2011Congregado et al ( , 2014Congregado et al ( , 2020Congregado et al ( , 2021 applied a series of nonlinear models, testing different hypotheses of effects asymmetry. Evans (2018) estimated a SVAR model, and showed the effects of a business cycle (output) shock on the labour market participation rate.…”

Section: Literature Reviewmentioning

confidence: 99%

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Separating aggregate discouraged and added worker effects: the case of a former transition country

Congregado

Gałecka‐Burdziak

Golpe

et al. 2021

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Research background: We analyse the added worker effect (AWE) and the discouraged worker effect (DWE) from an aggregate perspective. The first effect refers to an increase in labour force participation in response to a decrease in the wage rate. The second effect refers to the decision by workers who have been unsuccessful in their job search to leave the labour market or to decrease their labour force participation. For our analysis, we use the case of Poland, a country with a persistently low labour force participation rate. Purpose of the article: While previous studies focused on the net of the two effects, we aim to analyse the two effects both separately and simultaneously. We propose a new approach for analysing the two effects. We generalise and model them as resulting from different shocks: (i) the AWE as the result of a negative wage income shock, and (ii) the DWE as the result of a positive job search time shock. The underlying assumption is that both shocks have at least a transitory effect on the labour force participation rate. However, we also track the potential long-lasting effects of these shocks, and we analyse the reactions of gender and age groups to them. While this approach demonstrates the robustness of our results, it also provides the range of the sensitivity, as it shows that there are large differences in the magnitude of the AWE and the DWE for different labour market cohorts. Methods: We use the multivariate unobserved component model to extract the AWE and the DWE, and we then use VAR models, applying sign and exclusion restrictions to model the underlying shocks. We use quarterly data for Poland in 1995?2019. Most of these data come from the Labour Force Survey, while the rest come from Statistics Poland. Findings & value added: In contrast to previous literature, which analysed only the net effect of the two effects, we model the AWE and the DWE separately. Contrary to the findings of previous research, our approach seems to confirm that both effects are simultaneously present in the labour market, and both effects influence the labour force participation rate. Thus, we find that both effects are significant. Specifically, we show that the AWE is stronger, but transitory; while the DWE is weaker, but long-lasting.

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Section: Discussionsupporting

confidence: 87%

Section: Discussionmentioning

confidence: 98%

Section: Discussionmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%