Revisiting Okun’s Law in European Union countries

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to examine Okun's Law in European countries by distinguishing between the transitory and the permanent effects of output changes upon unemployment and by examining the effect of labor market protection policies upon Okun's coefficients. Design/methodology/approach -Quarterly data for 13 European Union countries, from the second quarter of 1993 until the first quarter of 2014, are used. Panel data techniques and Mundlak decomposition models are estimated. Findings -Okun's Law is robust to alternative specifications. The effect of output changes to unemployment rates is weaker for countries with increased labor market protection expenditures and it is more persistent for countries with low labor market protection. Originality/value -The paper provides evidence that the permanent effect of output changes upon unemployment rates is quantitatively larger than the transitory impact. In addition, it provides evidence that increased labor market protection mitigates the adverse effects of a decrease in output growth rate upon unemployment.

Asymmetry relationship between economic growth and unemployment rates in the Saudi economy: Application of Okun’s law during the period 1991–2017

“…Maria et al (2008) confirmed that the rate of unemployment and per capita income fluctuate over successive periods, and this is repeated over time, i.e., the dynamic analysis between the positive growth of income and unemployment rates. Economou and Psarianos (2016) also confirmed that Okun's law is robust to alternative specifications. The effect of output changes on unemployment rates is weaker for countries with increased labor market protection expenditures, and it is more persistent for countries with low labor market protection.…”

Unemployment and economic growth: Is there a relationship in the European Union?

“…It can be observed that the coefficient derived in the present study corresponds well with the values derived in previous studies of this type conducted by Freeman (2001), Sögner and Stiassny (2002), Ball et al (2017), and Economou and Psarianos (2016). The coefficient derived is smaller in the absolute value than the one in Okun's original article (0.30).…”

“…Despite the numerous scientific publications in the researched area, most only address data regarding a particular national economy. However, in recent years, certain studies -for example, Lee (2000), Dogru (2013), Perman and Tavera (2005), Anderton et al (2014), Economou and Psarianos (2016), have attempted to overcome this shortcoming by applying a cross-country analysis of the relationship between unemployment and economic growth in the Eurozone, the European Union, the Organisation for Economic Co-operation and Development, etc.…”

Examining the Stability of Okun's Coefficient

“…Similar results have been found in Europe, where Economou and Psarianos (2016) show that the Okun's relationship is robust across specifications but the sensitivity of output to changes in unemployment is weaker for countries with increased labour market protection expenditures. These findings echo those of Cazes et al (2013) who examine crisis-struck countries and present empirical evidence that the responsiveness in the unemployment rate during the global downturn was lower in countries where workers are afforded greater employment protection.…”

“…Similar results have been found in Europe, where Economou and Psarianos () show that the Okun's relationship is robust across specifications but the sensitivity of output to changes in unemployment is weaker for countries with increased labour market protection expenditures. These findings echo those of Cazes et al .…”