Gains in labor force participation rates in Chile have slowed in recent years. We examine their determinants using a cohort-model analysis. Allowing for both age- and cohort-specific effects in the context of a seemingly unrelated regression equations (SURE) approach, we find that age factors play an important role in determining participation decisions, especially for males. For females, we find that strong positive time trends dominate the downward pressure from demographics, although those trends have recently dissipated. In addition, we find that both cohort effects and the business cycle shape participation decisions. Using our cohort-based analysis, we construct projections of participation rates, which suggest population aging will put downward pressure on labor inputs, and thus potential output, in coming years. Further increases in female labor force participation—supported by policies— could more than offset the downward pressure from demographics.
International Monetary Fund. External Relations Dept.
1 EU15: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom.
2 G10: Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, United Kingdom, United States.
Data: Organization for Economic Cooperation and Development (OECD), LaborForceStatistics Database, 2005.
Lower taxes and more child care
Results from panel regressions suggest
Source: OECD, LaborForceStatistics Database, 2005.
After a long period of stability, the Canadian labor participation rate has risen rapidly over the last decade, driven mainly by an increase in female participation ( Figure 1 ). The aggregate participation rate has surpassed that in the United States and converged to the high levels of the Nordic countries. While the male participation rate has fallen modestly since the early 1990s, female participation has risen significantly. At 73