Working Paper: NBER ID: w21460
Authors: Shuaizhang Feng; Yingyao Hu; Robert Moffitt
Abstract: Unemployment rates in countries across the world are typically positively correlated with GDP. China is an unusual outlier from the pattern, with abnormally low, and suspiciously stable, unemployment rates according to its official statistics. This paper calculates, for the first time, China’s unemployment rate from 1988 to 2009 using a more reliable, nationally representative household survey in China. The unemployment rates we calculate differ dramatically from those supplied in official data and are much more consistent with what is known about China’s labor market and how it has changed over time in response to structural changes and other significant events. The rate averaged 3.9% in 1988-1995, when the labor market was highly regulated and dominated by state-owned enterprises, but rose sharply during the period of mass layoff from 1995- 2002, reaching an average of 10.9% in the subperiod from 2002 to 2009. We can also calculate labor force participation rates, which are not available in official statistics at all. We find that they declined throughout the whole period, particularly in 1995-2002 when the unemployment rate increased most significantly. We also report results for different demographic groups, different regions, and different cohorts.
Keywords: unemployment; labor force participation; China; economic transformation; urban household survey
JEL Codes: J64; O15; O53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Official unemployment rates in China are significantly underestimated (F66) | True unemployment rate averaged 3.9% from 1988 to 1995 (J64) |
| Mass layoffs from SOEs (1995-2002) (J63) | Unemployment rate rose sharply (F66) |
| Structural changes in the economy (L16) | Increase in unemployment (J64) |
| Liberalization of the labor market (J48) | Increase in unemployment (J64) |
| Increased rural-to-urban migration (R23) | Increase in unemployment (J64) |
| Changes in labor market conditions (J29) | Decline in labor force participation rates (J21) |
| Demographic shifts (J11) | Decline in labor force participation rates (J21) |
| Structural deficiencies in the official statistics (C80) | Mismeasurement of unemployment (E24) |
| Hukou system and low levels of unemployment benefits (J68) | Significant underreporting of unemployment (J64) |