Unemployment and labour force participation in Japan

Abstract

This article studies a long-run relationship between the labour-force participation rate and the unemployment rate in Japan. By using cointegration analysis, we demonstrate that there exists a long-run relationship between the two variables for male workers but not for female workers. Furthermore, using labour-force data by age group, we find the added-worker effect for young males and the discouraged-worker effect for middle-aged and old male groups.

Keywords:

• labour-force participation
• unemployment
• discouraged-worker effect
• added-worker effect
• cointegration

JEL Classification:

• E24
• J60

Notes

¹ The unemployment invariance hypothesis suggests that the long-run unemployment rate is independent of the labour force. While Layard et al. (1991) provided evidence in support of this hypothesis, Karanassou and Snower (2004) provided a critique of it.

² The data for the sample period are released from the website of the Japanese Ministry of Internal Affairs and Communications, http://www.stat.go.jp/.