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Atlanta Fed Working Papers


Decomposing Changes in the Aggregate Labor Force Participation Rate

Julie L. Hotchkiss
Working Paper 2009-6a
Revised July 2009

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This paper presents a simple methodology for decomposing changes in the aggregate labor force participation rate (LFPR) over time into demographic group changes in labor force participation behavior and in population share. The purpose is to identify the relative importance of behavioral changes and population changes as driving forces behind changes in the aggregate LFPR.

JEL classification: J11, J21, E24

Key words: labor force participation, decomposition, forecasting


Alexander Ellis of the U.S. Census Bureau was extremely helpful in obtaining historical population projections. The author also benefited greatly from e-mail correspondence from Karen Smith and David Brauer. The author also appreciates Bruce Fallick's willingness to share his model's forecasts of labor force participation rates. Additional assistance was received from Elaine Clokey, Kathryn Rees, and Amanda Kay Seals. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Please address questions regarding content to Julie L. Hotchkiss, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8198, julie.l.hotchkiss@atl.frb.org.

For further information, contact the Public Affairs Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309-4470, 404-498-8020.