Cross-country Evidence on a Nonlinear Okun Curve
AbstractThis paper presents cross-country evidence on a nonlinear Okun curve. The analysis is based on a simple error-correction model of unemployment. The model is estimated using a threshold model estimator. Evidence from 20 OECD countries for 1960-1997 gives support for the existence of nonlinearities in terms of the output growth effects. Output growth has a strong effect on unemployment when unemployment is low and output is high, and vice versa. Thus, in bad times, the effect of output growth on unemployment can be close to zero. In addition to this nonlinear output effect, also the population growth effect appears to be of similar type. The above mentioned basic results turn out to be robust in terms of estimation method (single equation vs pooled data estimation) and specification of the threshold variable.
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 Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 239.
Date of creation: 31 Dec 2000
Date of revision:
Find related papers by JEL classification:
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
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.:
- Richard Harris & Brian Silverstone, 2000. "Asymmetric Adjustment of Unemployment and Output in New Zealand: Rediscovering Okun's Law," Working Papers in Economics 00/02, University of Waikato, Department of Economics.
- Prachowny, Martin F J, 1993. "Okun's Law: Theoretical Foundations and Revised Estimates," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 331-36, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anita Niskanen).
If references are entirely missing, you can add them using this form.