American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Misclassification Errors and the Underestimation of the US Unemployment Rate
American Economic Review
vol. 103,
no. 2, April 2013
(pp. 1054–70)
Abstract
Using recent results in the measurement error literature, we show that the official US unemployment rate substantially underestimates the true level of unemployment, due to misclassification errors in the labor force status in the Current Population Survey. During the period from January 1996 to August 2011, the corrected monthly unemployment rates are between 1 and 4.4 percentage points (2.1 percentage points on average) higher than the official rates, and are more sensitive to changes in business cycles. The labor force participation rates, however, are not affected by this correction.Citation
Feng, Shuaizhang, and Yingyao Hu. 2013. "Misclassification Errors and the Underestimation of the US Unemployment Rate." American Economic Review, 103 (2): 1054–70. DOI: 10.1257/aer.103.2.1054Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E32 Business Fluctuations; Cycles
- J21 Labor Force and Employment, Size, and Structure