Cross-country comparison: labor force participation in Canada and Italy

One of the most important requirements to a sound macroeconomic model is the capability to explain the difference in evolution of modelled parameters across developed countries.  For example, a consistent model of the rate of participation in labour force, LFP, has to describe the striking difference observed in the long-term behaviour of LFP in Canada and Italy. Figures 1 and 2 depict the measured (open circless), as provided by the BLS: http://www.bls.gov/data/, and predicted LFP. The latter is obtained from the model linking LFP to real GDP per capita only [1]. The GDP estimates are taken from the Conference Board data base (at GK PPPs).

Our model shows an exceptional predictive power for both countries. This accurate prediction is obtained despite the measured LFP in Canada has been growing since 1960 and that in Italy has been on decline.  Moreover, even short-term deviations from the overall trend are well predicted in time and amplitude. In Figures 1 and 2 we added two new measurements made in 2008 and 2009 to the original curves published in [1]. 

One can conclude that the model does not contradict actual measurements in Sweden, Canada, and Italy.  We are going to extend the set of countries and the duration of relevant time series.

Figure 1. Measured and predicted LFP in Canada.                  

Figure 2. Measured and predicted LFP in Italy. 
1. Ivan O. KITOV, 2008. "The Driving Force of Labor Force Participation in Developed Countries," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(3(5)_Fall), pages 203-222.

No comments:

Post a Comment