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Documents de travail du Département des Affaires économiques de l'OCDE

Documents de travail du Département des affaires économiques de l’OCDE recouvrant toutes les activités de ce département : conjoncture économique, analyse politique et projections ; politique fiscale, dépenses publiques et fiscalité ; questions structurelles dont le vieillissement, la croissance et la productivité, la migration, l’environnement, le capital humain, le logement, les échanges et les investissements, les marchés de l’emploi, la réforme réglementaire, la concurrence, la santé et d’autres thèmes.

English, French

A revised approach to trend employment projections in long-term scenarios

The paper describes revisions to the trend employment component of the production function underpinning long-term economic scenarios. Starting with historical age and sex-specific employment rates, a novel approach is developed to correct for cyclical effects using the country-level employment gap while allowing the different sex and age groups to exhibit different sensitivities to the economic cycle. From the resulting cyclically adjusted age/sex-specific employment rates, trend entry and exit rates into/out of employment are computed using the traditional cohort approach. The different employment propensities of existing cohorts are then used to project future employment rates, with entry and exit rates of new cohorts assumed to mimic the most recent ones. To construct scenarios, the model allows a number of policy settings to influence employment rate projections, notably the legal retirement age, tax wedges, family benefits, etc. The sizes of these effects are sourced from recent OECD work on the quantification of structural reforms, and are also specific to sex and age groups. The trend total employment projection is obtained by aggregating age/sex-specific employment rate projections using external demographic projections.

English

Keywords: cyclical adjustment, cohort model, projections, potential employment, Trend employment, long-term scenarios, long-term model, employment gap
JEL: E27: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption, Saving, Production, Employment, and Investment: Forecasting and Simulation: Models and Applications; C53: Mathematical and Quantitative Methods / Econometric Modeling / Forecasting Models; Simulation Methods; J21: Labor and Demographic Economics / Demand and Supply of Labor / Labor Force and Employment, Size, and Structure; E24: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
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