Unregistered Employment, Lower Volatility of Unemployment Rate and Sustainable Development of the Chinese Labor Market

Round 1

Reviewer 1 Report

My comments on the paper, Unregistered Employment, Lower Volatility of Unemployment Rate, and Sustainable Development of the Chinese Labor Market, submitted to Sustainability. 

1. Line 33 Countries should be countries 

2. Many of the citations in the paper use author surnames then [ ].  Is this the correct format for Sustainability?

3. Line 130, remove "s" from capitals

4. How was the equation derived for households in equation (1)? 

5. How were the equations (2) and (3) derived? 

6. The authors used the Calvo, which includes both wage and price is augmented so that the wages and prices are reoptimized are partially indexed to the inflation rates. Would the latter be correct?

7.  How were the equations derived for (5)-(8)) for these elements for the DSGE model? 

8. What is DMP?  This acronym is not defined anywhere in the paper. 

9. It may be useful to provide the linearized versions of the equations from the DSGE model in an appendix.  The linearized equations are used in the estimation of the results of the DSGE models.

10. What computer software was used to estimate the DSGE model?  It should be mentioned in the text of the paper or after each of the tables and figures of the empirical results. 

11. How does this DSGE model differ from the BVAR ?  That is, how did the root mean square error (RMSE) of the DSGE model compare to the RMSE of the BVAR? 

12. The DSGE model used in this paper was a Bayesian approach. Thus, the forecasting is done by employing posterior for the parameters of interest.  How was the Bayesian approach in this DSGE model carried out?

13. How was this model calibrated?  The use of the term calibration seems vague and confusing.  The DSGE model is estimated as a system rather than equation by the equation as in other macroeconomic models.  A little discussion about how calibration was used in this empirical analysis would be useful for the readers.

14. Just a thought. Should this DSGE model or any DSGE model include the assumption of rational expectations?  Incorporating rational expectations would enable the analyst to solve the inter-temporal optimization problem of economic agents with forward-looking expectations. 

15. The assumption that firms and households have intertemporal decisions would be wrong. Firms are more than just optimizing agents.  This was discussed in The Theory of the Growth of the Firm by Penrose in 1959. 

16.  The issue about the loanable funds market in DSGE models. In reality, the credit-funded investment “determines” savings rather than the other way around, as often shown in the DSGE models. And since investment depends on demand while insensitive to the real interest rate, aggregate demand drives growth.  What are your thoughts about this latter issue the authors? 

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Reviewer 2 Report

Thank you for allowing me to revise the manuscript "Unregistered Employment, Lower Volatility of Unemployment Rate, and Sustainable Development of the Chinese Labor Market".

This article focused on the lower volatility of the unemployment rate in China. The author claims that it is the large size of unregistered employment, not the size of the informal economy, plays a key role in explaining the lower volatility of the unemployment rate in China. The author proposes a DSGE model. 

I think that the article is current and interesting. Following are some comments to improve the quality of the manuscript.

 - The authors propose the dynamics of the unemployment rate and informality. I suggest the author dedicate more space in the introduction to better explain the problem addressed in the article. 

- How is the proposed model (DGSE) better than the others? This aspect should also be notify in the paper and also emphasized in the discussion part of the article. 

- The limitations of the study (and DGSE) should be discussed.

- Finally, the author should elaborate on the implications of their study in terms of policy recommendations for China. I think this is an important issue to be addressed. 

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Reviewer 3 Report

Dear authors,

The article is interesting and addresses an important topic in the context of unemployment , but a few changes should be made:

1. The abstract should be made more precise.

2.  Describe more precisely what research gap the article fills and indicate the research objectives as they are not clearly formulated.

3.  Please describe what your article contributes to the topic compared to other published material?

4. The authors should consider expanding the methodology.

5. The literature should be expanded to include studies conducted in other countries on this topic.

6. You need to complete the conclusions so that they are consistent with the arguments presented.

Author Response

Please see the attachment.

Author Response File: Author Response.pdf