The link between unemployment and labor force participation rates in Japan: A regional perspective |
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Institution: | 1. School of Political Science and Economics, Tokai University, 4-1-1 Kitanakame, Hiratsuka, Kanagawa 259-1292, Japan;2. University of Marketing and Distribution Sciences, 3-1, Gakuen-Nishimachi, Nishi-ku, Kobe, Hyogo 651-2188, Japan;3. Graduate School of Economics, Kobe University, 2-1, Rokkodai-cho, Nada-ku, Kobe, Hyogo 657-8501, Japan |
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Abstract: | This paper explores the co-integrating relationship between unemployment and the labor force participation rate in Japan from a regional perspective. The univariate co-integration tests indicate that the “no co-integration” hypothesis cannot be rejected in Northern-Kanto, Hokuriku and Kyusyu. Because the univariate co-integration approach might suffer from low power we employed a panel version of the co-integration test recently developed by Westerlund (2006) that also considers the possibility of multiple structural breaks in the level of individual co-integrating equations. The test results lend support for an overwhelmingly long-run relationship between the two variables across regions. Accordingly, this finding is not in line with the unemployment invariance hypothesis. As a result a nationally orientated employment policy aimed at improving the unemployment and labor force participation rates might be preferred over a region-specific employment policy in Japan. |
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Keywords: | Unemployment invariance hypothesis Unemployment Labor force participation |
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