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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Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number
19-2002.
Length: 19 pages Date of creation: Apr 2002 Date of revision: Handle: RePEc:icr:wpicer:19-2002
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Find related papers by JEL classification: J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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