Is the Labour Force Participation Rate Non-Stationary in Romania?

Issue: 4/2014

Aviral Kumar Tiwari

Faculty of Management, IBS Hyderabad, IFHE University, Room No.: Block C- 204, Dontanpalli (Village), Shankerpalli Road, Hyderabad, A.P., Pin: 501203, India, Email:,

Mihai Mutascu

Corresponding author, West University of Timisoara, Faculty of Economics and Business Administration, 16 J.H. Pestalozzi Street, 300115, Timisoara, Romania, and LEO (Laboratoire d'Eco-nomie d'Orléans) UMR7322, Faculté de Droit d'Economie et de Gestion, University of Orléans, Rue de Blois - B.P. 6739, 45067, Orléans, France, Email:

The purpose of this paper is to test hysteresis of the Romanian labour force participation rate, by using time series data, with quarterly frequency, covering the pe-riod 1999Q1-2013Q4. The main results reveal that the Romanian labour force participation rate is a nonlinear process and has a partial unit root (i.e. it is stationary in the first regime and non-stationary in the second one), the main breaking point being registered around year 2005. In this context, the value of using unemployment rate as an indicator for capturing joblessness in this country is debatable. Starting from 2005, the participation rate has not followed long-term changes in unemployment rate, the disturbances having permanent effects on labour force participation rate.

DOI: 10.1515/revecp-2015-0007
JEL: J21, J01, C12
Keywords: Process, Policy Implications, Participation, Nonlinearity, Labour, Hysteresis