Unemployment burden and its distribution: Theory and evidence from India

We develop a measure of unemployment that takes into account both the duration and intensity of unemployment. This measure satisfies several desirable properties, including distribution sensitivity, which deals with differences among the unemployed. It is particularly suited to developing countries because individuals in these countries display considerable variation in labor force participation, unemployment duration, and unemployment intensity. It can also be decomposed into mean and variance components and contributions to unemployment by various subgroups of the population. We use this measure and data from National Sample Surveys on employment and unemployment to understand unemployment in India during the period 1993 to 2012. We show that unemployment has generally fallen, although the distribution of unemployment has worsened. Moreover, unemployment is driven to a greater extent by higher educated groups; the unemployment among these groups is also fairly substantial. We explain these findings and suggest some policies.