Apparent Asymmetries in the Relationship Between the Participation Rate
and the Employment Rate in Australia.
by
Robert Dixon.
May 1996
Department of Economics. University of Melbourne. Parkville Victoria
3052 Australia
ABSTRACT
A large number of empirical studies exist now for Australia reporting
evidence consistent with the endogeneity of the participation rate. None
of these models examine the possibility that the elasticity of the workforce
with respect to employment might vary systematically over the business
cycle. For the aggregate data set examined in this paper, it appears to
be the case that the discouraged worker effect is smaller than the encouraged
worker effect, indeed, the former appears to be approximately one-half
the size of the latter effect. By itself, this might go some way towards
explaining the apparent 'step' increase in unemployment we have observed
over the past two decades.
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