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Long-term unemployment and labour force participation: a decomposition of unemployment to test for the discouragement and added worker hypotheses

Fuchs, Johann ; Weber, Enzo



Abstract

We sharpen tests for 'discouragement' and 'added worker' effects by splitting the explanatory variable - the unemployment rate - into a short-term component and a long-term component. While short-term unemployment (STU) might not result in additional workers on a large scale, long-term unemployment (LTU) reduces household income more, increasing the need for additional income. On the other hand, ...

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