Discrepancy between Registered and Actual Unemployment Rates in China: An Investigation in Provincial Capital Cities

The unemployment rate is a key indicator of labor market and economic performance. Based on a unique survey, we estimate the unemployment rate at 13.44 percent in 30 provincial capital cities in China in 2007, which is well above the officially announced registered unemployment rate. The discrepancy results from inaccuracy in the calculation of registered unemployment. The discrepancy is not stably evolving across regions or over the years, making it difficult to recover the true unemployment rate using a simple multiplier approach. We further investigate the sources of the discrepancy by examining the determinants of unemployment registration. It is evident that participation in certain public activities, which would facilitate the spread of knowledge related to job-searching and unemployment registration, encouraged unemployment registration. Social attention to government anti-unemployment programs also encouraged unemployment registration. These findings confirm the behavioral hypothesis that incomplete knowledge and limited attention can cause deviation from optimal choice. The policy implications of the findings of the study are discussed.