TY  - JOUR
AU  - Barnichon, Regis
AU  - Figura, Andrew
TI  - Declining Desire to Work and Downward Trends in Unemployment and Participation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 21252
PY  - 2015
Y2  - June 2015
DO  - 10.3386/w21252
UR  - http://www.nber.org/papers/w21252
L1  - http://www.nber.org/papers/w21252.pdf
N1  - Author contact info:
Regis Barnichon
Research Department
Federal Reserve Bank of San Francisco
101 Market St, San Francisco, CA 94105
E-Mail: regis.barnichon@sf.frb.org

Andrew Figura
Federal Reserve Board
20th Street and Constitution Avenue N.W.  
Washington, DC 20551
E-Mail: andrew.figura@frb.gov
M1  - published as Regis Barnichon, Andrew Figura. "Declining Desire to Work and Downward Trends in Unemployment and Participation," in Martin Eichenbaum and Jonathan A. Parker, editors, "NBER Macroeconomics Annual 2015, Volume 30" University of Chicago Press (2016)

M3  - presented at "30th Annual Conference on Macroeconomics", April 17-18, 2015
AB  - This paper argues that a key aspect of the US labor market is the presence of time-varying heterogeneity across nonparticipants. We document a decline in the share of nonparticipants who report wanting to work, and we argue that that decline, which was particularly strong in the second half of the 90s, is a major aspect of the downward trends in unemployment and participation over the past 20 years. A decline in the share of "want to work" nonparticipants lowers both the participation rate and the unemployment rate, because a nonparticipant who wants to work has (i) a higher probability of entering the labor force (compared to other nonparticipants), and (ii) a higher probability of joining unemployment conditional on entering the labor force. We use cross-sectional variation to estimate a model of nonparticipants' propensity to want to work, and we find that changes in the provision of welfare and social insurance, possibly linked to the mid-90s welfare reforms, explain about 50 percent of the decline in desire to work among nonparticipants.
ER  -