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The Evolution of Rotation Group Bias: Will the Real Unemployment Rate Please Stand Up?

Author

Listed:
  • Alan Krueger
  • Alexandre Mas
  • Xiaotong Niu

Abstract

This paper documents that rotation group bias -- the tendency for labor force statistics to vary systematically by month in sample in labor force surveys -- in the Current Population Survey (CPS) has worsened considerably over time. The estimated unemployment rate for earlier rotation groups has grown sharply relative to the unemployment rate for later rotation groups; both should be nationally representative samples. The rise in rotation group bias is driven by a growing tendency for respondents to report job search in earlier rotations relative to later rotations. We investigate explanations for the change in bias. We find that rotation group bias increased discretely after the 1994 CPS redesign and that rising nonresponse is likely a significant contributor. Survey nonresponse increased after the redesign, and subsequently trended upward, mirroring the time pattern of rotation group bias. Consistent with this explanation, there is only a small increase in rotation group bias for households that responded in all eight interviews. An analysis of rotation group bias in Canada and the U.K. reveal no rotation group bias in Canada and a modest and declining bias in the U.K. There is not a "Heisenberg Principle" of rotation group bias, whereby the bias is an inherent feature of repeated interviewing. We explore alternative weightings of the unemployment rate by rotation group and find that, despite the rise in rotation group bias, the official unemployment does no worse than these other measures in predicting alternative measures of economic slack or fitting key macroeconomic relationships.

Suggested Citation

  • Alan Krueger & Alexandre Mas & Xiaotong Niu, 2014. "The Evolution of Rotation Group Bias: Will the Real Unemployment Rate Please Stand Up?," NBER Working Papers 20396, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20396
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    References listed on IDEAS

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    1. Solon, Gary, 1986. "Effects of Rotation Group Bias on Estimation of Unemployment," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 105-109, January.
    2. Daniel Aaronson & Bhashkar Mazumder & Shani Schechter, 2010. "What is behind the rise in long-term unemployment?," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 34(Q II), pages 28-51.
    3. Katharine G. Abraham & Robert Shimer, 2001. "Changes in Unemployment Duration and Labor Force Attachment," NBER Working Papers 8513, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Kathrin Ellieroth, 2019. "Spousal Insurance, Precautionary Labor Supply, and the Business Cycle - A Quantitative Analysis," 2019 Meeting Papers 1134, Society for Economic Dynamics.
    2. Abdullah Almaatouq, 2016. "Complex Systems and a Computational Social Science Perspective on the Labor Market," Papers 1606.08562, arXiv.org.
    3. Rustam Ibragimov & Jihyun Kim & Anton Skrobotov, 2020. "New robust inference for predictive regressions," Papers 2006.01191, arXiv.org, revised Aug 2020.
    4. Fernando Rios-Avila & Gustavo Canavire-Bacarreza, 0. "The Effect of Immigration on Labor Market Transitions of Native-Born Unemployed in the United States," Journal of Labor Research, Springer, vol. 0, pages 1-37.
    5. Hie Joo Ahn & James D. Hamilton, 2019. "Measuring Labor-Force Participation and the Incidence and Duration of Unemployment," Finance and Economics Discussion Series 2019-035, Board of Governors of the Federal Reserve System (U.S.), revised 17 May 2019.
    6. Mark Borgschulte & Heepyung Cho & Darren Lubotsky, 2019. "Partisanship and Survey Refusal," NBER Working Papers 26433, National Bureau of Economic Research, Inc.
    7. Bernhardt, Robert & Wunnava, Phanindra V., 2020. "The CPS Citizenship Question and Survey Refusals: Causal and Semi-Causal Evidence Featuring a Two-Stage Regression Discontinuity Design," IZA Discussion Papers 13350, Institute of Labor Economics (IZA).
    8. Hirsch, Barry & Husain, Muhammad M. & Winters, John V., 2016. "The Puzzling Fixity of Multiple Job Holding across Regions and Labor Markets," IZA Discussion Papers 9631, Institute of Labor Economics (IZA).
    9. Ippei Shibata, 2019. "Labor Market Dynamics: A Hidden Markov Approach," IMF Working Papers 19/282, International Monetary Fund.
    10. Ori Heffetz & Daniel B. Reeves, 2016. "Difficulty to Reach Respondents and Nonresponse Bias: Evidence from Large Government Surveys," NBER Working Papers 22333, National Bureau of Economic Research, Inc.
    11. Bach, Ruben L. & Eckman, Stephanie, 2020. "Rotation group bias in reporting of household purchases in the U.S. Consumer Expenditure Survey," Economics Letters, Elsevier, vol. 187(C).
    12. Bollinger, Christopher R. & Hirsch, Barry & Hokayem, Charles M. & Ziliak, James P., 2018. "Trouble in the Tails? What We Know about Earnings Nonresponse Thirty Years after Lillard, Smith, and Welch," IZA Discussion Papers 11710, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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