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Modelling Nonlinear Behavior of Labor Force Participation Rate by STAR: An Application for Turkey

Cengiz, Sibel and Sahin, Afsin (2013): Modelling Nonlinear Behavior of Labor Force Participation Rate by STAR: An Application for Turkey.

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Abstract

During the economic crisis periods, due to the discouraged worker and added worker effects, we may not gather healthy information from the unemployment rates concerning the labor market. For this reason, it is claimed in the literature that the Labor Force Participation Rate (LFPR) may be a better indicator than the unemployment rate during the economic crises. When the time series data exhibits asymmetry and nonlinearity during the recessions, the LFPR tends to diminish. Following, the unemployment rate may decrease because of the diminishment in LFPR. To add more, it may not reflect the actual aspects of the market. As a result while considering the unemployment rate we should also observe the LFPR. The participation decision of labor in the course of shocks depends on the coherence of the labor market to the fluctuations. On the other hand, during the expansions, the LFPR increases gradually. The behavior and the univariate properties of the LFPR also vary differently considering the gender non-similarities.

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