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Empirical evidence for Okun’s law in Colombia: an analysis of rural areas at the region level

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  • Cardoso López, Diego
  • López Cabrera, Jesús Antonio

Abstract

This article analyses the relationship between income and unemployment, controlling for the variable of human capital, in rural areas of four Colombian regions. The objective is to test for the existence of the empirical regularity known as Okun’s law and thereby measure income’s impact on unemployment by region. The analysis is based on a monthly series for the period 2010–2022, and the methodologies used to determine the behaviour of this relationship include ordinary least square differences, dynamic ordinary least squares, and error correction and vector autoregressive models, establishing the existence of equilibria in the short and long terms. The results are found to be consistent with Okun’s law, showing a negative relationship between real income and unemployment and a positive one between unemployment and human capital.

Suggested Citation

  • Cardoso López, Diego & López Cabrera, Jesús Antonio, 2025. "Empirical evidence for Okun’s law in Colombia: an analysis of rural areas at the region level," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    • Handle: RePEc:ecr:col070:82408
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    1. Arias, María Alejandra & Ibáñez, Ana María & Zambrano, Andrés, 2019. "Agricultural production amid conflict: Separating the effects of conflict into shocks and uncertainty," World Development, Elsevier, vol. 119(C), pages 165-184.
    2. Malley, Jim & Molana, Hassan, 2008. "Output, unemployment and Okun's law: Some evidence from the G7," Economics Letters, Elsevier, vol. 101(2), pages 113-115, November.
    3. Laszlo, Sonia, 2008. "Education, Labor Supply, and Market Development in Rural Peru," World Development, Elsevier, vol. 36(11), pages 2421-2439, November.
    4. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
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