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A Duration-Sensitive Measure of the Unemployment Rate: Theory and Application

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  • Vani K. Borooah

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Abstract

The measurement of unemployment, like that of poverty, involves two distict steps: identification and aggregation. In this two-step process, the issue of identifying the unemployed has received considerable attention but, once the unemployed have been identiified, the aggregation issue has been addressed by simply "counting heads": the unemployment rate is conventionally defined as the proportion of the labour force that, on a given date, is unemployed. This, in particular, leads to differences between individuals, in their unemployment experiences being ignored when the unemployment rate is being computed. This paper - predicated on the proposition that what matters to a person is not just the fact of unemployment but also its duration - proposes a methodology, derived from the measurement of income inequality, for adjusting unemployment rates so as to make them "duration-sensitive". In consequence, different values of the "duration-sensitive" rate will, depending upon the degree of inequality in the distribution of unemployment duration, and upon the extent to which society is averse to such inequality, be associated with the same value of the conventionally defined unemployment rate. A numerical example, based on published data for seven major OECD countries, illustrates the methodology.

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Bibliographic Info

Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 19-2002.

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Length: 19 pages
Date of creation: Apr 2002
Date of revision:
Handle: RePEc:icr:wpicer:19-2002

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  1. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-31, March.
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Cited by:
  1. Kaushik Basu & Patrick Nolen, 2006. "Vulnerability, Unemployment and Poverty: A Class of Distribution and Sensitive Measures, Its Axiomatic Properties and Applications," Economics Discussion Papers 623, University of Essex, Department of Economics.
  2. Stephen Bazen & Xavier Joutard & Mouhamadou M. Niang, 2012. "The Duration-Based Measurement of Unemployment: Estimation Issues and an Application to Male-Female Unemployment Differences in France," Working Papers halshs-00793056, HAL.
  3. Carlos Gradín & Coral del Río & Olga Cantó, 2010. "Measuring poverty accounting for time," Working Papers 169, ECINEQ, Society for the Study of Economic Inequality.
  4. Peter Lambert, 2009. "Mini-symposium: The 1990, 1992 and 1993 papers on distributionally sensitive measures of unemployment by Manimay Sengupta and Anthony Shorrocks," Journal of Economic Inequality, Springer, vol. 7(3), pages 269-271, September.
  5. Basu, Kaushik & Nolen, Patrick, 2004. "Vulnerability, Unemployment and Poverty: A New Class of Measures, Its Axiomatic Properties and Application," Working Papers 04-07, Cornell University, Center for Analytic Economics.

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