Abstract
AbstractSince the early 1970s, it was argued that shifts from relatively smaller to larger youth cohorts in the labor force raise the unemployment rate. In contrast, using US state‐level data, two studies come to a contrary conclusion. I provide a theoretical framework for local labor markets that considers age cohort differences in labor market characteristics. Using a spatial panel data model and US county‐level data (2000–2014), the estimates provide strong evidence that aging of the working‐age population reduces overall unemployment by almost 1 percentage point. Long‐run effects that consider local feedbacks are even larger.
Highlights
The baby-boomer generation entered the labor market decades ago, and changes in the labor market related to this cohort have been analyzed
For periods of demographic change, the results provide strong evidence that age cohort-related differences in labor market characteristics are an important driver of the overall unemployment change
I examined the relationship between the age structure of the working-age population and unemployment at the regional level using both a theoretical and an empirical model
Summary
The baby-boomer generation entered the labor market decades ago, and changes in the labor market related to this cohort (size) have been analyzed. Notes: Dependent variable: ln of unemployment rate; ln youth share: ln of youth share (15–24 years); W(ln youth share): spatial lagged ln of youth share (15–24 years); BIC: Bayesian information criterion; all regressions include fixed and time effects; county-cluster-robust standard errors are in parentheses, period: annual data for 2000–2014; balanced county-level data. Notes: Dependent variable: ln of unemployment rate; BIC: Bayesian information criterion; all regressions include: fixed and time effects, local and spatial lagged working-age population growth factor; county-cluster-robust standard errors are in parentheses; period: annual data for 2000–2014; balanced county-level data. Overall, based on the estimates, aging of the labor force reduces the share of regional mobile workers, and this reduction decreases the local unemployment rate.
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