Modelling nonlinear behavior of labor force participation rate by STAR: An application for Turkey

The aim of this paper is to contribute to the understanding of the behavior of participation rates in terms of gender differences. We employed smooth autoregressive transition models for the quarterly Turkish labor force participation rates (LFPR) data between 2000: Q1 – 2011: Q4 to present an asymmetric participation behavior. The smoothness parameter indicates a gradual transition from low to high regimes. It is higher for female workers compared to the male workers. Participation rates diminish during a recession but they increase smoothly during the periods of expansion. The estimation results of Enders et al. (1998) also verified the asymmetry and nonlinearity in participation rates. During periods of economic expansion, they are higher than the threshold but the low regime indicator function takes the value zero. The results of the paper have economic implications for policy makers. Due to the discouraged worker and added worker effects, LFPR should be observed with the unemployment rates while evaluating the tightness of the labor market.