Cyclical and Secular Movements in Labor Supply
The pace of industrialization is influenced to a considerable extent by the availability of a stock of human resources that can effectively be incorporated into the productive process. Labor supply constrains economic development because the stock of resources is low or the skills required to meet the changing needs of the economy are inadequate. If the latter is the problem, it will take some time before improvements in training and education equip the la bor force to meet industry's needs. But, generally, skill shortages are short-lived if timely investments are made in specific and gen eral training. The concern of this chapter is with the problem of an inadequate stock of human resources and the extent to which labor supply constrains the attainment of economic potential.
The primary variable of interest is the labor force participation rate. 1 The participation rate measures the share of population that is economically active, that is, either employed or unemployed. The chapter is particularly concerned with understanding the determinants of changes in both sex-specific and age-sex-specific participation rates during the postwar period. Over this period of time the Puerto Rican economy exhibited rapid industrial growth, substantial net out-migration, an increase in capital-intensive manufacturing activities, and a dramatic rise in public sector employment. The resulting changes in economic structure were accompanied by the substitution of female for male labor within the economy as indicated by rising female labor force participation and, more significantly, by sharp and sustained declines in male labor force participation.
The study of labor supply and its relation to potential output has received considerable attention in the United States. 2 Although