# **Box l Unemployment: the Labor Force Survey vs. administrative**<sup>**data**</sup>

In Croatia as in most other countries, there are two main<sup>sourcesof data on</sup> unemployment: the Labor Force Survey (which is carried out twice<sup>a year by the Croatian</sup> Bureau of Statistics) and the unemployment register, maintained by<sup>the Croatian Employment</sup> Service (CES).

Both data sets have its strengths and weaknesses. The administrative<sup>data collected</sup> by the CES it provide long time-series of monthly information on persons<sup>who registered as</sup> unemployed (their socio-demographic characteristics, reasons for unemployment,<sup>duration of</sup> job search, etc.). Thanks to the fact that administrative data are<sup>compiled and published</sup> monthly, they allow one to follow changes in unemployment on a regular<sup>basis.As such they</sup> provide an early signal on changes in labor market conditions. However,<sup>the data are affected</sup> by various incentives to register, such as eligibility to unemployment<sup>benefits, pension and</sup> health insurance, and social assistance benefits. As a result, some<sup>persons register in order to</sup> get access to these benefits, although they are not genuinely unemployed.<sup>They either have</sup> an informal sector job, are not looking for a job, or are not available<sup>for work. At the same</sup> time, persons who are genuinely unemployed, often do not register if<sup>they are not eligiblefor</sup> benefits associated with registration. The net effect is usually (although<sup>not necessarily</sup> always) that the unemployment register data overstate the actual magnitude<sup>of</sup> unemployment. In the case of Croatia this upward bias is quite substantial<sup>(see text).</sup> Moreover, changes in benefit regime and thus in incentives<sup>to registerimply that</sup> administrative data on unemployment are often not fully comparable over<sup>time.For example,</sup> the tightening of unemployment benefit eligibility conditions leads<sup>to the drop in registered</sup> unemployment, as does more aggressive application ofjob search/availability<sup>tests, despite</sup> the fact the underlying labor market conditions have not changed: In contrast, unemployment data coming from the Labor Force Survey (LFS)<sup>provide</sup> information on the labor force status which is not affected by administrative<sup>regulations and</sup> thus more correctly reflect actual labor market conditions. The<sup>LFSuses the standard</sup> Intemational Labor Office (ILO) definition of unemployment,<sup>whereby a persons is</sup> unemployed if he/she jointly meets three conditions: (a) does not have<sup>a job, (b) is actively</sup> looking for a job, and (c) is available for work. Thanks to this the LFS produces intemationally comparable data on unemployment. In principle, the<sup>LFSalso produces</sup> unemployment data that is consistent over time, although changes in the<sup>sampleframe,survey</sup> design, etc. may lead to a limited comparability of results over time.<sup>For example,the CBS</sup> changed the sample frame for the LFS in 2000, which affected comparability<sup>of data.The</sup> disadvantage of the LFS is that the survey is carried out with a relatively<sup>low frequencyand</sup> sometimes irregularly. In addition, processing of the results is time<sup>consuming,meaning that</sup> the results are disseminated with a substantial delay (about 3 months in<sup>Croatia).This makes</sup> the LFS less suitable for regular and "real time" monitoring of labor<sup>market conditions.</sup> However, given the large number of variables it provides, the LFS<sup>is an invaluablesource of</sup> information for the purposes of labor market research.

In this paper we relay mainly on the LFS and accordingly use the<sup>ILO unemployment</sup> rate and other labor force indicators. However, to illustrate the trend<sup>in unemployment,we</sup> use the administrative data on registered unemployment, as in this<sup>case a much longer time-</sup> series is available (the first wave of the LFS was conducted in Croatia<sup>only in November</sup> 1996).

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