A DISCUSSION OF THE APPROPRIATE METHOD FOR DECOMPOSING CHANGES OVERTIME IN A WEIGHTED AGGREGATE INTO ITS PROXIMATE DETERMINANTS AND AN APPLICATION TO MALE PARTICIPATION RATE CHANGES

This paper considers the most appropriate technique to be used to decompose moments over time of a weighted average into rate and weight (age) components and also proposes various graphical methods by which we can best present the results of decomposition procedures. The material is illustrated with reference to data on labour market participation by males in Australia over the period 1978 - 2001. The main findings are: First, that changes in the age composition are the main source of change in the (weighted) aggregate participation rate. Second, that it is the downward trend in the participation rate for males in the age group 25-54 which for some 6 or 7 years now has been virtually the only source of a reduced rate component in the aggregate. Changes in participation rates by older males, although quantitatively important prior to 1985, are no longer the main source of change in the aggregate participation rate for males.