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Empirical Economics

, Volume 45, Issue 1, pp 401–433 | Cite as

Labor force participation and the discouraged worker effect

  • John K. DagsvikEmail author
  • Tom Kornstad
  • Terje Skjerpen
Article

Abstract

This article analyzes labor force participation with particular reference to the discouraged worker effect. Discouraged workers are those who will search for work when the labor market is tight but do not search for work when the labor market is slack because they consider their chances of finding a suitable job too low. The theoretical point of departure is a search model where the worker evaluates the expected utility of searching for work and decides to participate in the labor market if the expected utility of search exceeds the utility of not working. From this framework, we derive an empirical model for the probability that the worker will be out of the labor force, unemployed, or employed. The model is estimated on a sample of married and cohabitating women in Norway covering the period from 1988 to 2008. The results show that the discouraged worker effect is substantial. On average, about one-third of those who are out of the labor force are discouraged, according to our analysis.

Keywords

Discouraged workers Labor force participation Labor supply Random utility modeling 

JEL Classification

C35 J21 J22 J64 

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Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  • John K. Dagsvik
    • 1
    Email author
  • Tom Kornstad
    • 1
  • Terje Skjerpen
    • 1
  1. 1.Research Department Statistics NorwayOsloNorway

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