No. 396 - The dynamics of the Italian labour force participation rate:determinants and implications for the employment and unemployment rate

This work analyzes the evolution of the labour force participation rate in Italy, as compared with the other main euro-area countries in the last decade.

It breaks down the dynamics of the activity rate into the portion due to changes in the average socio-demographic characteristics of the population and that related to within socio-demographic group variations in the probability of participating.

The results show that the main drivers of the increase in Italy’s participation rate are structural and long-lasting: they are mostly related to the rise in the population’s share of highly-educated individuals, who are more strongly attached to the labour market, and to the positive labour supply effects of the recent pension reforms.

In the decade ahead, while socio-demographic forces are expected to stop providing a positive push to the aggregate activity rate, due to the ageing of the particularly numerous cohort of individuals born in the 1960s, the increase in the labour supply of women and of the elderly will continue to boost the overall labour force participation rate.

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