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An Analysis of Okun's Law, the Natural Rate, and Voting Preferences for the 50 States

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  • Ryan W Herzog

    () (Gonzaga University)

Abstract

In this paper we test Okun's Law for individuals states from 1990 through 2012. We find the relationship between output and unemployment becomes stronger following the 2007 Great Recession. For most states the impact of a change in output on unemployment has increased and in many cases the two-to-one relationship has shifted to a three-to-two relationship. Further, we also find for most states the natural rate of unemployment has increased. We use average employment ratios by major industries to explain differences in Okun's Law across states. We find a stronger Okun effect for states with relatively large employment in professional and business services, construction, and manufacturing. Finally, we find a significant correlation between states that lean more Democrat with a stronger Okun effect.

Suggested Citation

  • Ryan W Herzog, 2013. "An Analysis of Okun's Law, the Natural Rate, and Voting Preferences for the 50 States," Economics Bulletin, AccessEcon, vol. 33(4), pages 2504-2517.
  • Handle: RePEc:ebl:ecbull:eb-13-00486
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Okun's Law; United States; Natural Rate; Output; Regional;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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