Compositional changes of the labor force and the increase of the unemployment rate: an estimate for the U.S.

Abstract

This paper estimates how demographic changes in the composition of the labor force affect the unemployment rate in the U.S. In addition to the effect coming from changes in the weights of the individual groups comprising the total, the impact of compositional changes on the individual unemployment rates is estimated by using a dummy variables model and incorporated into the estimate upon the overall unemployment rate. The results suggest that the incorporation of the latter effect is significant. Indeed, the estimates presentad in this paper are almost twice as high as those provided by the fixed-weight-method used in previous studies.