Post-recession US employment through the lens of a non-linear Okun’s law
AbstractThis paper aims at investigating the relationship between employment and GDP in the United States. We disentangle trend and cyclical employment components by estimating a non-linear Okun’s law based on a smooth transition error-correction model that simultaneously accounts for long-term relationships between growth and employment and short-run instability over the business cycle. Our findings based on out-of-sample conditional forecasts show that, since the exit of the 2008-09 recession, US employment is on average around 1% below the level implied by the long run output-employment relationship, meaning that about 1.2 million of the trend employment loss cannot be attributed to the identified cyclical factors.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2013-12.
Length: 19 pages
Date of creation: 2013
Date of revision:
Okun’s law; trend employment; non-linear modeling;
Other versions of this item:
- Menzie D. Chinn & Laurent Ferrara & Valérie Mignon, 2013. "Post-recession US Employment through the Lens of a Non-linear Okun’s law," NBER Working Papers 19047, National Bureau of Economic Research, Inc.
- Menzie Chinn & Laurent Ferrara & Valérie Mignon, 2013. "Post-Recession US Employment through the Lens of a Non-Linear Okun's Law," Working Papers 2013-13, CEPII research center.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-04 (All new papers)
- NEP-FOR-2013-06-04 (Forecasting)
- NEP-LAB-2013-06-04 (Labour Economics)
- NEP-MAC-2013-06-04 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rothstein, Jesse, 2012.
"The Labor Market Four Years Into the Crisis: Assessing Structural Explanations,"
Institute for Research on Labor and Employment, Working Paper Series
qt2x576316, Institute of Industrial Relations, UC Berkeley.
- Jesse Rothstein, 2012. "The Labor Market Four Years into the Crisis: Assessing Structural Explanations," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 65(3), pages 437-500, July.
- Jesse Rothstein, 2012. "The Labor Market Four Years Into the Crisis: Assessing Structural Explanations," NBER Working Papers 17966, National Bureau of Economic Research, Inc.
- Laurence M. Ball & Daniel Leigh & Prakash Loungani, 2013. "Okun's Law: Fit at Fifty?," NBER Working Papers 18668, National Bureau of Economic Research, Inc.
- Chen, Jinzhu & Kannan, Prakash & Loungani, Prakash & Trehan, Bharat, 2012.
"New evidence on cyclical and structural sources of unemployment,"
Federal Reserve Bank of San Francisco, issue March, pages 1-23.
- Jinzhu Chen & Bharat Trehan & Prakash Kannan & Prakash Loungani, 2011. "New Evidenceon Cyclical and Structural Sources of Unemployment," IMF Working Papers 11/106, International Monetary Fund.
- Zinzhu Chen & Prakash Kannan & Prakash Loungani & Bharat Trehan, 2011. "New evidence on cyclical and structural sources of unemployment," Working Paper Series 2011-17, Federal Reserve Bank of San Francisco.
- Laure Turner & Hervé Boulhol, 2008. "Recent Trends and Structural Breaks in US and EU15 Labour Productivity Growth," OECD Economics Department Working Papers 628, OECD Publishing.
- Edward P. Lazear & James R. Spletzer, 2012. "The United States Labor Market: Status Quo or A New Normal?," Working Papers 12-28, Center for Economic Studies, U.S. Census Bureau.
- Terasvirta, T & Anderson, H M, 1992. "Characterizing Nonlinearities in Business Cycles Using Smooth Transition Autoregressive Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages S119-36, Suppl. De.
- van Dijk, Dick & Teräsvirta, Timo & Franses, Philip Hans, 2000.
"Smooth Transition Autoregressive Models - A Survey of Recent Developments,"
Working Paper Series in Economics and Finance
380, Stockholm School of Economics, revised 17 Jan 2001.
- Dick van Dijk & Timo Terasvirta & Philip Hans Franses, 2002. "Smooth Transition Autoregressive Models — A Survey Of Recent Developments," Econometric Reviews, Taylor & Francis Journals, vol. 21(1), pages 1-47.
- van Dijk, D.J.C. & Terasvirta, T. & Franses, Ph.H.B.F., 2000. "Smooth transition autoregressive models - A survey of recent developments," Econometric Institute Research Papers EI 2000-23/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
- Li, Jing, 2011. "Bootstrap prediction intervals for SETAR models," International Journal of Forecasting, Elsevier, vol. 27(2), pages 320-332, April.
- Benati, Luca, 2007.
"Drift and breaks in labor productivity,"
Working Paper Series
0718, European Central Bank.
- Eitrheim, Oyvind & Terasvirta, Timo, 1996.
"Testing the adequacy of smooth transition autoregressive models,"
Journal of Econometrics,
Elsevier, vol. 74(1), pages 59-75, September.
- Eitrheim, Øyvind & Teräsvirta, Timo, 1995. "Testing the Adequacy of Smooth Transition Autoregressive Models," Working Paper Series in Economics and Finance 56, Stockholm School of Economics.
- Brian Silverstone & Richard Harris, 2001. "Testing for asymmetry in Okun's law: A cross-country comparison," Economics Bulletin, AccessEcon, vol. 5(2), pages 1-13.
- Li, Jing, 2011. "Bootstrap prediction intervals for SETAR models," International Journal of Forecasting, Elsevier, vol. 27(2), pages 320-332.
- Marcello M. EstevÃ£o & Evridiki Tsounta, 2011. "Has the Great Recession Raised U.S. Structural Unemployment?," IMF Working Papers 11/105, International Monetary Fund.
- Viren, Matti, 2001. "The Okun curve is non-linear," Economics Letters, Elsevier, vol. 70(2), pages 253-257, February.
- Edward S. Knotek & II, 2007. "How useful is Okun's law?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 73-103.
- Owyang, Michael T. & Sekhposyan, Tatevik, 2012. "Okun’s law over the business cycle: was the great recession all that different?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 399-418.
- Bec Frederique & Othman Bouabdallah & Laurent Ferrara, 2011.
"The possible shapes of recoveries in Markov-Switching models,"
THEMA Working Papers
2011-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Bec, F. & Bouabdallah, O. & Ferrara, L., 2011. "The possible shapes of recoveries in Markov-switching models," Working papers 321, Banque de France.
- Frédérique BEC & Othman BOUABDALLAH & Laurent FERRARA, 2011. "The Possible Shapes of Recoveries in Markov-Switching Models," Working Papers 2011-02, Centre de Recherche en Economie et Statistique.
- Edward P. Lazear & James R. Spletzer, 2012. "The United States Labor Market: Status Quo or A New Normal?," NBER Working Papers 18386, National Bureau of Economic Research, Inc.
- James Morley & Jeremy Piger, 2012. "The Asymmetric Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 208-221, February.
- Lee, Jim, 2000. "The Robustness of Okun's Law: Evidence from OECD Countries," Journal of Macroeconomics, Elsevier, vol. 22(2), pages 331-356, April.
- Jon D. Wisman & Aaron Pacitti, 2013. "Ending the Crisis With Guaranteed Employment and Retraining," Working Papers 2013-12, American University, Department of Economics.
- Ryan Herzog, 2013. "Using state level employment thresholds to explain Okun’s Law," IZA Journal of Labor Policy, Springer, vol. 2(1), pages 1-26, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valérie Mignon).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.