Misclassification Errors and the Underestimation of U.S. Unemployment Rates
AbstractUsing recent results in the measurement error literature, we show that the official U.S. unemployment rates substantially underestimate the true levels of unemployment, due to misclassification errors in labor force status in Current Population Surveys. Our closed-form identification of the misclassification probabilities relies on the key assumptions that the misreporting behaviors only depend on the true values and that the true labor force status dynamics satisfy a Markov-type property. During the period of 1996 to 2009, the corrected monthly unemployment rates are 1 to 4.6 percentage points (25% to 45%) higher than the official rates, and are more sensitive to changes in business cycles. Labor force participation rates, however, are not affected by this correction. We also provide results for various subgroups of the U.S. population defined by gender, race and age.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5057.
Length: 40 pages
Date of creation: Jul 2010
Date of revision:
Publication status: published in: American Economic Review, 2013, 103 (2), 1054-70
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Other versions of this item:
- Shuaizhang Feng & Yingyao Hu, 2010. "Misclassification errors and the underestimation of U.S. unemployment rates," Economics Working Paper Archive 561, The Johns Hopkins University,Department of Economics.
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- How high in the true US unemployment rate?
by Economic Logician in Economic Logic on 2010-08-05 14:25:00
- Jung, Philip & Kuhn, Moritz, 2012.
"Earnings losses and labor mobility over the life-cycle,"
40287, University Library of Munich, Germany.
- Philip Jung, 2013. "Earnings losses and labor mobility over the lifecycle," 2013 Meeting Papers 771, Society for Economic Dynamics.
- Jung, Philip & Kuhn, Moritz, 2012. "Earnings Losses and Labor Mobility over the Lifecycle," IZA Discussion Papers 6835, Institute for the Study of Labor (IZA).
- Michael W.L. Elsby & Bart Hobijn & Aysegül Sahin, 2013. "On the importance of the participation margin for market fluctuations," Working Paper Series 2013-05, Federal Reserve Bank of San Francisco.
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