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Long Run Trends in Unemployment and Labor Force Participation in Urban China

TitleLong Run Trends in Unemployment and Labor Force Participation in Urban China
Publication TypeJournal Article
Year of Publication2017
AuthorsFeng, S, Hu, Y, Moffitt, R
JournalJournal of Comparative Economics
Volume45
Pagination304-324
ISBN Number01475967
Accession Number1656003
KeywordsAggregate Human Capital, Aggregate Labor Productivity E24, Economic Development: Human Resources, Economic Development: Urban, Rural, Regional, and Transportation Analysis, employment, HOUSING, Human Development, Income Distribution, Inflation P24, Infrastructure O18, Intergenerational Income Distribution, Macroeconomic Analyses of Economic Development O11, Migration O15, Money, Socialist Systems and Transitional Economies: National Income, Product, and Expenditure, Socialist Systems and Transitional Economies: Urban, Rural, and Regional Economics P25, Time Allocation and Labor Supply J22, Unemployment, wages
Abstract

Unemployment rates in countries across the world are strongly correlated with GDP. China is an unusual outlier from the pattern, whose official government statistics show abnormally low, and suspiciously stable, unemployment rates relative to its GDP. This paper reports estimates of China's unemployment rate for its local urban Hukou population using a more reliable, nationally representative dataset for that population than in prior work, and which spans a longer period of history than in the past literature. The unemployment rates we calculate differ dramatically from those supplied in official data and are much more consistent with what is known about key historical developments in China's labor market. The rate averaged 3.7% 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 to 2002, reaching an average of 9.5% in the subperiod from 2002 to 2009. The rates were even higher when demographic composition is held fixed. 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 find that the impacts of these changes fell most heavily on the unskilled (women, those with less education, and younger individuals). Finally, estimates of unemployment and labor force participation rates are also provided for all urban residents, including migrants without local urban Hukou, and show the same patterns of change over time.