A Cohort-Based Analysis of Labor Force Participation for Advanced Economies
IMF Working Papers, May 22, 2018
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- A Cohort-Based Analysis of Labor Force Participation for Advanced Economies
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Bibliographic details
- Authors: Francesco Grigoli, Zsoka Koczan, Petia Topalova
- Published: May 22, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484355251.001
Summary of objectives and approach
- Uses a cohort-based model of labor force participation for 17 advanced economies estimated over the 1985-2016 period.
- Focuses on common patterns of participation over the life cycle and shifts in these patterns across generations.
- Emphasizes gender-specific dynamics, particularly the role of women’s cohort entry in shifting age participation profiles.
Key findings
- Demographic transition: advanced economies face a major demographic transition with the number of elderly rising precipitously relative to the working-age population.
- Divergent participation trajectories: despite similar demographic accelerations, advanced economies experienced markedly different trajectories in overall labor force participation rates and workforce attachment of men and women.
- Cohort effects on aggregate supply:
- Common life-cycle participation patterns and intergenerational shifts play a significant role in aggregate labor supply.
- The entry of new cohorts of women led to upward shifts in the age participation profile, boosting aggregate participation rates.
- This upward process plateaued in most advanced economies, with signs of reversal in some countries.
- Forecasts: using the model's results to forecast future participation trends, the study projects sizable declines in aggregate participation rates over the next three decades due to the aging of the population.
- Policy simulation: illustrative simulations show that implementing policies encouraging labor supply can help attenuate but may not fully offset demographic pressures.
Projections and scenarios
- Projection horizon: next three decades (from the publication context).
- Main scenario: aging population drives sizable declines in aggregate participation rates.
- Policy simulation scenario: labor-supply–encouraging policies can attenuate declines but are unlikely to fully offset demographic pressures.
Policy implications and recommendations
- Policies that encourage labor supply can mitigate demographic-driven declines in aggregate participation rates.
- Given the limited offsetting potential of such policies in illustrative simulations, policymakers should consider a combination of measures (implied by the findings): enhancing labor force attachment across cohorts, addressing gender-specific barriers, and adapting to an older population structure.
Content in this bundle
- A Cohort-Based Analysis of Labor Force Participation for Advanced Economies, WP/18/120, May 2018