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Exact Unemployment Rate Indices

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  • Michael J. Greenwood
  • Ulrich Kohli

Abstract

Conventional unemployment rate measures tend to overestimate the degree of labor underutilization if unemployment disproportionately affects less educated and generally less productive workers. Based on index number theory as well as on econometric techniques, this article proposes a number of alternative measures that are exact for specific labor aggregator functions. The results for the United States show that the conventional, unweighted unemployment rate overestimates the true rate by about 0.6 of a percentage point, or by almost 14%.

Suggested Citation

  • Michael J. Greenwood & Ulrich Kohli, 2003. "Exact Unemployment Rate Indices," Contemporary Economic Policy, Western Economic Association International, vol. 21(2), pages 218-226, April.
    • Handle: RePEc:bla:coecpo:v:21:y:2003:i:2:p:218-226
    DOI: 10.1093/cep/byg006
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    References listed on IDEAS

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    1. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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    Cited by:

    1. Thomas Bolli & Mathias Zurlinden, 2009. "Measuring Growth of Labor Quality and the Quality-Adjusted Unemployment Rate in Switzerland," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 55(2), pages 121-145.

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