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Mr. Francesco Grigoli, Zsoka Koczan, and Petia Topalova
Advanced economies are in the midst of a major demographic transition, with the number of elderly rising precipitously relative to the working-age population. Yet, despite the acceleration in demographic shifts in the past decade, advanced economies experienced markedly different trajectories in overall labor force participation rates and the workforce attachment of men and women. Using a cohort-based model of labor force participation for 17 advanced economies estimated over the 1985-2016 period, we document a significant role of common patterns of participation over the life cycle and shifts in these patterns across generations for aggregate labor supply, especially in the case of women. The entry of new cohorts of women led to upward shifts in the age participation prole, boosting aggregate participation rates. However, this process plateaued in most advanced economies, with signs of reversal in some. Using the model's results to forecast future participation trends, we project sizable declines in aggregate participation rates over the next three decades due to the aging of the population. Illustrative simulations show that implementing policies encouraging labor supply can help attenuate but may not fully offset demographic pressures.
Bengt Petersson, Rodrigo Mariscal, and Kotaro Ishi

increase economic growth IV. CONCLUSIONS References Tables 1. Labor Participation Trends 2. Hours by Education Attainment 3. Regression Results 4. Canada: Calculations of Growth Impacts 5. Population and Participation by Education Achievement Figures 1. Selected Advanced Economies: Female Labor Force Participation Rate, 1976–2015 2. Canada: Female Labor Force Participation Rate and Labor Productivity 3. Growth Decomposition 4. Labor Productivity Growth and Female Labor Participation 5. OECD Economies: Female Labor force Participation Rates

economies estimated over the 1985–2016 period, we document a significant role of common patterns of participation over the life cycle and shifts in these patterns across generations for aggregate labor supply, especially in the case of women. The entry of new cohorts of women led to upward shifts in the age participation profile, boosting aggregate participation rates. However, this process plateaued in most advanced economies, with signs of reversal in some. Using the model’s results to forecast future participation trends, we project sizable declines in aggregate

International Monetary Fund

. External Competitiveness Trends in the real effective exchange rate Measures of cost competitiveness: dollar wages and unit labor costs Penetration of new export markets C. Indicators of Current Account Sustainability D. Summary and Conclusions Annex I. Data Issues V. Labor Market Issues A. Introduction B. Analytical Framework Labor market data C. Labor Market Participation and Employment Labor market participation Trends in employment Trends in output, employment and productivity D. Developments in Unemployment

. The dashed and dash-dotted lines for Europe and other AEs denote weighted averages. The Shaded areas denote the interquartile ranges. What underlies these divergent trends across countries and genders, and what are the prospects for labor force participation in advanced economies going forward? Differences in the exact timing and pace of the demographic transition as well as the severity of the impact of the global crisis on individual countries may explain some of the observed cross-country divergence. However, the striking disparity in participation trends

Mr. Ravi Balakrishnan, Mai Dao, and Jeremy Zook

will continue to decline. (labor force participation rate, percent) Sources: Aaronson and others (2014) ; U.S Congressional Budget Office ( CBO, 2014 ); U.S. Bureau of Labor Statistics (BLS); Haver Analytics; and authors’ estimates. Note: The labor force participation rate measures the percentage of persons aged 16 and over who have jobs or are actively seeking them. A fuller picture of the labor market requires an examination of factors beyond the unemployment rate . A new measure of labor market slack What do these participation trends

International Monetary Fund. Western Hemisphere Dept.

the production function and is set at 0.35) sum up to one. Data on the working age population is obtained from the UN and the labor force participation rate is obtained from the ILO up to 2013 and assumed to grow at the 1999-2013 average annual rate thereafter. A labor force participation trend is calculated. The capital stock series is constructed using a perpetual inventory method: K t =(1 – δ ) K t —1 + I t where the depreciation rate δ is set as 0.05, while the initial capital stock is computed as K 0 = I * /( g + δ ). I * is the benchmark

Benjamin Hilgenstock and Zsoka Koczan

of policies and age and cohort effects, especially on the participation of women and older workers, with until recently little emphasis on the potential role of trade and automation in shaping participation trends over the past cople of decades. Notable recent exceptions include Gregory, Salomons and Zierahn (2016) and Graetz and Michaels (2015) , who have noted that the impact of technology may be different in Europe. Figure 3. Evolution of Labor Force Participation Rates, 1990–2016 (Percent) Sources: Organisation for Economic Co-operation and