Structural Break in the Norwegian Labor Force Survey Due to a Redesign During a Pandemic

Abstract

The labor force surveys (LFS) of all EU countries underwent a substantial redesign in January 2021. To ensure coherent labor market time series for the main indicators in the Norwegian LFS, we model the impact of the redesign. We use a state-space model that takes explicit account of the rotating pattern of the LFS. We also include auxiliary variables related to employment and unemployment that are highly correlated with the LFS variables we consider. The results of a parallel run are also included in the model. The purpose of the article is to quantify the structural breaks due to the redesign. This article makes two contributions to the literature on the effects of redesign in surveys with a rotating panel, such as the LFS. First, we suggest a symmetric specification of the process of the wave-specific effects. Second, we account for substantial fluctuations in the labor force estimates due to the COVID-19 pandemic in the time around the LFS redesign by applying time-varying hyperparameters for both the LFS variables and the auxiliary variables. The specification with time-varying hyperparameters shows a better fit compared to the specification with time-invariant hyperparameters.