Surveyed Unemployment Rate and Okun’s Law in China: And Its Implication for Youth (Un)employment

Previous studies find that Okun’s Law is invalid in China due to low quality of the unemployment indicators. This study re-examines the validity of Okun’s Law in China using Surveyed Unemployment Rate (SUR) newly released by the National Bureau of Statistics. The findings indicate that Okun’s Law holds for SUR in China and the results are robust. We also estimate the time-varying natural unemployment rate in China using the state space model and Kalman filter, which reveals that the high unemployment rate for youth after 2020 results from increasing natural unemployment rate. This study contributes to a better understanding of the structural features of China’s labor market, and helps improve the effectiveness of the policy of “employment stability”.