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Regional growth and unemployment in the medium run: asymmetric cointegrated Okun’s Law for UK regions

Author

Listed:
  • Silvia Palombi

    (University of Strathclyde [Glasgow])

  • Roger Perman

    (University of Strathclyde [Glasgow])

  • Christophe Tavéra

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper tests for the presence of a long run asymmetric Okun's Law relationship between regional output and regional unemployment rate in U.K. regions. The existence of cointegration is tested with a panel data version of the hidden cointegration technique suggested by Granger and Yoon. A novelty of the paper is to combine the method of hidden cointegration with a panel data method of removing crosssectional dependence. The long run Okun relationship for regions in the U.K. appears to confirm results found elsewhere in the literature on countries as a whole, although the coefficients tend to be smaller.

Suggested Citation

  • Silvia Palombi & Roger Perman & Christophe Tavéra, 2015. "Regional growth and unemployment in the medium run: asymmetric cointegrated Okun’s Law for UK regions," Post-Print halshs-01183238, HAL.
    • Handle: RePEc:hal:journl:halshs-01183238
    DOI: 10.1080/00036846.2015.1068922
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    References listed on IDEAS

    as
    1. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    2. David E. Altig & Terry J. Fitzgerald & Peter Rupert, 1997. "Okun's law revisited: should we worry about low unemployment?," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
    3. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    4. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    5. Bernard Fingleton, 2003. "Increasing returns: evidence from local wage rates in Great Britain," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 716-739, October.
    6. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
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    Cited by:

    1. Koutroulis, Aristotelis & Panagopoulos, Yannis & Tsouma, Ekaterini, 2016. "Asymmetry in the response of unemployment to output changes in Greece: Evidence from hidden co-integration," The Journal of Economic Asymmetries, Elsevier, vol. 13(C), pages 81-88.
    2. Donald Houston, 2020. "Local resistance to rising unemployment in the context of the COVID‐19 mitigation policies across Great Britain," Regional Science Policy & Practice, Wiley Blackwell, vol. 12(6), pages 1189-1209, December.
    3. Porras-Arena, M. Sylvina & Martín-Román, Ángel L., 2023. "The heterogeneity of Okun's law: A metaregression analysis," Economic Modelling, Elsevier, vol. 128(C).
    4. Bande, Roberto & Martín-Román, Ángel, 2018. "Regional differences in the Okun’s Relationship: New Evidence for Spain (1980-2015)," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 41, pages 137-165.

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