Labour Force Participation and Sectoral Dynamics Over The Business Cycle: Regional Evidence For Ecuador

Abstract

Ecuador is a developing country characterised by a high degree of informality and has undergonesignificant economic transformations that have had an impact on the labour market. Despite thenational trend of a slight decline in labour force participation, there are notable differences indevelopment across the country, making it an interesting case study. This article examines thedeterminants of regional differences in labour force participation and the sectoral structure ofemployment. Using a regional panel data analysis, it identifies the cyclicality of labour forceparticipation, formal and informal wage employment and self-employment for both sexes. Theresults of the decomposition highlight the significant influence of education, household conditions,age distribution and regional factors on regional labour force participation and employmentcomposition. The results show that labour force participation has undergone significant changesover time and exhibits strong counter-cyclical behaviour. The analysis shows that formalemployment is procyclical, while informal wage employment shows countercyclical fluctuations.Moreover, self-employment does not seem to be affected by the business cycle, except in recentyears. Finally, it is concluded that women's participation in the labour force is more related topolicies affecting the educational level of the population than to business cycle factors.