Exact Unemployment Rate Indices |
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| Authors: | Michael J Greenwood Ulrich Kohli |
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| Institution: | Greenwood:;Professor of Economics, Center for Economic Analysis, Campus Box 257, University of Colorado, Boulder, CO 80309-0257. E-mail Kohli:;Chief Economist, Swiss National Bank, Börsenstrasse 15, P.O. Box 2800, CH-8022 Zurich, Switzerland. E-mail |
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| 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%. |
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