Changes in Economic Activity: The Role of Age and Education

Loichinger, E. & Prskawetz, A. (2016). Changes in Economic Activity: The Role of Age and Education. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-16-012

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Abstract

The aim of the paper is to understand to which extend developments of labor force participation rates in selected European countries between 2000 and 2010 can be explained by age- and education-specific changes in participation rates as compared to changes in populations’ structural composition by age and education. We apply a decomposition methodology that allows us to disentangle changes in age- and education specific labor force participation rates from changes in the age and educational structure of the population.
Our results show that labor force participation rates of adult women would have increased even more, had it not been for the downward pressure from the shift in the age composition towards older age-groups with relatively lower levels of participation. This downward pressure also depressed male participation. The increase in participation
among older persons is mainly explained by participation increases among those with non-tertiary education and reinforced by a general shift towards higher levels of
educational attainment. Our results indicate that labor supply may not decrease to the extent expected due to population aging, given educational expansion and education specific patterns of economic activity.

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