Misclassification Errors and the Underestimation of the US Unemployment Rate

2013/04/01 by Shuaizhang Feng, Yingyao Hu · 1 citation
Economics, Econometrics and Finance · Health Professions · #Labor market dynamics and wage inequality #Employment and Welfare Studies #Monetary Policy and Economic Impact

paper · doi:10.1257/aer.103.2.1054

openalex publication_date 2013/04/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/22

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.

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• Yingyao Hu [wikipedia]

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