Misclassification Errors and the Underestimation of U.S. Unemployment Rates

Shuaizhang Feng and Yingyao Hu

No 5057, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using 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.

Keywords: Current Population Survey; unemployment rate; labor force participation rate; misclassification; measurement error (search for similar items in EconPapers)
JEL-codes: C14 J21 J64 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2010-07
New Economics Papers: this item is included in nep-lab
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: American Economic Review, 2013, 103 (2), 1054-70

Downloads: (external link)
https://docs.iza.org/dp5057.pdf (application/pdf)

Related works:
Journal Article: Misclassification Errors and the Underestimation of the US Unemployment Rate (2013)
Working Paper: Misclassification Errors and the Underestimation of the U.S. Unemployment Rate (2012)
Working Paper: Misclassification errors and the underestimation of U.S. unemployment rates (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp5057

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().