Scandinavian Working Papers in Economics

Working Paper Series, Center for Labor Studies,
Uppsala University, Department of Economics

No 2010:13: Labor-Force Participation Rates and the Informational Value of Unemployment Rates: Evidence from Disaggregated US Data

Magnus Gustavsson () and Pär Österholm ()
Additional contact information
Magnus Gustavsson: Uppsala Center for Labor Studies, Postal: Department of Economics, Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Pär Österholm: National Institute of Economic Research

Abstract: The informational value of the aggregate US unemployment rate has recently been questioned because of a unit root in the labor-force participation rate; the lack of mean reversion implies that long-run changes in unemployment rates are highly unlikely to reflect long-run changes in joblessness. This paper shows that this critique also extends to unemployment rates for sub-populations, such as prime-aged males.

Keywords: Mean reversion; Unit-root test

JEL-codes: C22; E24; J21

13 pages, December 2, 2010

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