Decomposition of the recent increase in the labour force participation rate in Serbia

Abstract

The present work decomposes the recent increase in the labour force participation rate into two factors: the contribution of the age composition, and the contribution of the age- and sex-specific labour force participation rate. After a whole decade of stagnation, the labour force participation rate in Serbia has increased by 10% between 2012 and 2021, which opened the question of the deterministic basis for an in-creased economic activity in case of population that is aging and declining in size. For the purpose of decomposition, the method of overall rate decomposition has been used, which is considered to be the preferred standardization method. The results have shown that both the age composition as well as the age-specific labour force participation had a positive effect on the increase in overall economic activity. The effect of the age-specific labour force participation rates was significantly higher, contributing to more than 76% of the overall change, whereas the age composition resulted in only 22% change (25% change in case of male population, and 21% in case of female population). These findings shifted the research focus from aging population, as the key determinant of the labour force participation rate, towards the factors affecting the increase of specific age-related activity rates, but also towards the need to investigate the importance of other specific activity rates (apart from the age- and sex-related ones).