IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v69y2021icp307-323.html
   My bibliography  Save this article

Output-unemployment asymmetry in Okun coefficients for OECD countries

Author

Listed:
  • Bod’a, Martin
  • Považanová, Mariana

Abstract

Different asymmetries in Okun’s law for 21 OECD countries over the period 1989–2019 are studied in the paper. To this end, an extended Okun equation accommodating possibly differentiated responsiveness to output and unemployment fluctuations is formulated applicable not only at the level of a whole economy, but also separately to gender-specific parts of the labor market in a system framework. For most of the countries, Okun’s law asserts itself with a greater magnitude in years when output recedes than in those when it grows. In nearly all the countries, Okun’s law is found stronger with decreases in unemployment and weaker or offset with rising unemployment. Finally, in the majority of the countries, male unemployment is more sensitive to output fluctuations than female unemployment, or there is no significant difference whatsoever.

Suggested Citation

  • Bod’a, Martin & Považanová, Mariana, 2021. "Output-unemployment asymmetry in Okun coefficients for OECD countries," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 307-323.
  • Handle: RePEc:eee:ecanpo:v:69:y:2021:i:c:p:307-323
    DOI: 10.1016/j.eap.2020.12.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592620304513
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.eap.2020.12.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Anna Sanz-de-Galdeano & Anastasia Terskaya, 2020. "The labor market in Spain, 2002–2018," IZA World of Labor, Institute of Labor Economics (IZA), pages 403-403, March.
    2. Marques, André M. & Lima, Gilberto Tadeu & Troster, Victor, 2017. "Unemployment persistence in OECD countries after the Great Recession," Economic Modelling, Elsevier, vol. 64(C), pages 105-116.
    3. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90, National Bureau of Economic Research, Inc.
    4. Huang, Ho-Chuan (River) & Lin, Shu-Chin, 2008. "Smooth-time-varying Okun's coefficients," Economic Modelling, Elsevier, vol. 25(2), pages 363-375, March.
    5. Schlitzer, Giuseppe, 1995. "Testing the stationarity of economic time series: further Monte Carlo evidence," Ricerche Economiche, Elsevier, vol. 49(2), pages 125-144, June.
    6. Emrah Ismail Cevik & Sel Dibooglu & Salih Barişik, 2013. "Asymmetry in the Unemployment–Output Relationship Over the Business Cycle: Evidence from Transition Economies," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(4), pages 557-581, December.
    7. Ghazala Azmat & Maia Güell & Alan Manning, 2006. "Gender Gaps in Unemployment Rates in OECD Countries," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 1-38, January.
    8. Ulf Rinne & Klaus F Zimmermann, 2013. "Is Germany the North Star of Labor Market Policy?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(4), pages 702-729, December.
    9. Herve Queneau & Amit Sen, 2009. "Further Evidence on the Dynamics of Unemployment by Gender," Economics Bulletin, AccessEcon, vol. 29(4), pages 3162-3176.
    10. Viren, Matti, 2001. "The Okun curve is non-linear," Economics Letters, Elsevier, vol. 70(2), pages 253-257, February.
    11. Ara Stepanyan & Jorge Salas, 2020. "Distributional Implications of Labor Market Reforms: Learning from Spain's Experience," IMF Working Papers 2020/029, International Monetary Fund.
    12. Wesselbaum, Dennis, 2019. "Jobless recoveries: The interaction between financial and search frictions," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.
    13. Whitney K. Newey & Kenneth D. West, 1994. "Automatic Lag Selection in Covariance Matrix Estimation," Review of Economic Studies, Oxford University Press, vol. 61(4), pages 631-653.
    14. Herv� Queneau & Amit Sen, 2010. "On the persistence of the gender unemployment gap: evidence from eight OECD countries," Applied Economics Letters, Taylor & Francis Journals, vol. 17(2), pages 141-145, January.
    15. Khraief, Naceur & Shahbaz, Muhammad & Heshmati, Almas & Azam, Muhammad, 2020. "Are unemployment rates in OECD countries stationary? Evidence from univariate and panel unit root tests," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    16. Durech, Richard & Minea, Alexandru & Mustea, Lavinia & Slusna, Lubica, 2014. "Regional evidence on Okun's Law in Czech Republic and Slovakia," Economic Modelling, Elsevier, vol. 42(C), pages 57-65.
    17. Freeman, Donald G, 2001. "Panel Tests of Okun's Law for Ten Industrial Countries," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 511-523, October.
    18. Cho, Yoonyoung & Newhouse, David, 2013. "How Did the Great Recession Affect Different Types of Workers? Evidence from 17 Middle-Income Countries," World Development, Elsevier, vol. 41(C), pages 31-50.
    19. Mankart, Jochen & Oikonomou, Rigas, 2016. "The rise of the added worker effect," Economics Letters, Elsevier, vol. 143(C), pages 48-51.
    20. repec:kap:iaecre:v:20:y:2014:i:1:p:103-111 is not listed on IDEAS
    21. Michael C. Burda & Jennifer Hunt, 2011. "What Explains the German Labor Market Miracle in the Great Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 273-335.
    22. Ousama Ben-Salha & Zouhair Mrabet, 2019. "Is Economic Growth Really Jobless? Empirical Evidence from North Africa," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(4), pages 598-624, December.
    23. Lee, Grace H.Y. & Parasnis, Jaai, 2014. "Discouraged workers in developed countries and added workers in developing countries? Unemployment rate and labour force participation," Economic Modelling, Elsevier, vol. 41(C), pages 90-98.
    24. Kim B. Clark & Lawrence H. Summers, 1981. "Demographic Differences in Cyclical Employment Variation," Journal of Human Resources, University of Wisconsin Press, vol. 16(1), pages 61-79.
    25. Robert Dixon & G. C. Lim & Jan C. van Ours, 2017. "Revisiting the Okun relationship," Applied Economics, Taylor & Francis Journals, vol. 49(28), pages 2749-2765, June.
    26. Oliver Hutengs & Georg Stadtmann, 2014. "Age- and Gender-Specific Unemployment in Scandinavian Countries: An Analysis based on Okun’s Law," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 56(4), pages 567-580, December.
    27. Laurence Ball & Daniel Leigh & Prakash Loungani, 2017. "Okun's Law: Fit at 50?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(7), pages 1413-1441, October.
    28. Luca Zanin & Giampiero Marra, 2012. "Rolling Regression Versus Time‐Varying Coefficient Modelling: An Empirical Investigation Of The Okun'S Law In Some Euro Area Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 64(1), pages 91-108, January.
    29. Seifert, Stefanie & Schlenker, Eva, 2014. "Occupational segregation and organizational characteristics. Empirical evidence for Germany," management revue. Socio-economic Studies, Rainer Hampp Verlag, vol. 25(3), pages 185-206.
    30. Erica L. Groshen & Simon M. Potter, 2003. "Has structural change contributed to a jobless recovery?," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Aug).
    31. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    32. Gabriele Marconi & Miroslav Beblavý & Ilaria Maselli, 2016. "Age effects in Okun’s law with different indicators of unemployment," Applied Economics Letters, Taylor & Francis Journals, vol. 23(8), pages 580-583, May.
    33. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    34. 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.
    35. Sophie Dunsch, 2017. "Age- and Gender-Specific Unemployment and Okun’s Law in CEE Countries," Eastern European Economics, Taylor & Francis Journals, vol. 55(4), pages 377-393, July.
    36. Bredemeier, Christian & Juessen, Falko & Winkler, Roland, 2017. "Man-cessions, fiscal policy, and the gender composition of employment," Economics Letters, Elsevier, vol. 158(C), pages 73-76.
    37. Paramsothy Silvapulle & Imad Moosa & Mervyn Silvapulle, 2004. "Asymmetry in Okun's law," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 353-374, May.
    38. Hubert Gabrisch & Herbert Buscher, 2006. "The Relationship between Unemployment and Output in Post-communist Countries," Post-Communist Economies, Taylor & Francis Journals, vol. 18(3), pages 261-276.
    39. Plosser, Charles I. & Schwert, G. William, 1979. "Potential GNP: Its measurement and significance : A dissenting opinion," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 10(1), pages 179-186, January.
    40. Seifert, Stefanie & Schlenker, Eva, 2014. "Occupational segregation and organizational characteristics. Empirical evidence for Germany," management revue - Socio-Economic Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 25(3), pages 185-206.
    41. Grant, Angelia L., 2018. "The Great Recession and Okun's law," Economic Modelling, Elsevier, vol. 69(C), pages 291-300.
    42. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    43. Razzu, Giovanni & Singleton, Carl, 2016. "Gender and the business cycle: An analysis of labour markets in the US and UK," Journal of Macroeconomics, Elsevier, vol. 47(PB), pages 131-146.
    44. Jorge Belaire-Franch & Amado Peiró, 2015. "Asymmetry in the relationship between unemployment and the business cycle," Empirical Economics, Springer, vol. 48(2), pages 683-697, March.
    45. Randall S. Jones & Haruki Seitani, 2019. "Labour market reform in Japan to cope with a shrinking and ageing population," OECD Economics Department Working Papers 1568, OECD Publishing.
    46. Zanin, Luca, 2014. "On Okun’s law in OECD countries: An analysis by age cohorts," Economics Letters, Elsevier, vol. 125(2), pages 243-248.
    47. Peiró, Amado & Belaire-Franch, Jorge & Gonzalo, Maria Teresa, 2012. "Unemployment, cycle and gender," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 1167-1175.
    48. Laurence M. Ball, 2009. "Hysteresis in Unemployment: Old and New Evidence," NBER Working Papers 14818, National Bureau of Economic Research, Inc.
    49. Christian Dustmann & Bernd Fitzenberger & Uta Sch?nberg & Alexandra Spitz-Oener, 2014. "From Sick Man of Europe to Economic Superstar: Germany's Resurgent Economy," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 167-188, Winter.
    50. Andrew Evans, 2018. "Evidence of the added-worker and discouraged-worker effects in Australia," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(4), pages 472-488, July.
    51. Hilmar Schneider, 2019. "The labor market in Germany, 2000–2018," IZA World of Labor, Institute of Labor Economics (IZA), pages 379-379, December.
    52. Mindaugas Butkus & Janina Seputiene, 2019. "The Output Gap and Youth Unemployment: An Analysis Based on Okun’s Law," Economies, MDPI, vol. 7(4), pages 1-17, November.
    53. O. Hutengs & G. Stadtmann, 2013. "Age effects in Okun's law within the Eurozone," Applied Economics Letters, Taylor & Francis Journals, vol. 20(9), pages 821-825, June.
    54. Hilary Hoynes & Douglas L. Miller & Jessamyn Schaller, 2012. "Who Suffers during Recessions?," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 27-48, Summer.
    55. Johann Fuchs & Enzo Weber, 2017. "Long-term unemployment and labour force participation: a decomposition of unemployment to test for the discouragement and added worker hypotheses," Applied Economics, Taylor & Francis Journals, vol. 49(60), pages 5971-5982, December.
    56. Daiji Kawaguchi & Hiroaki Mori, 2019. "The labor market in Japan, 2000–2018," IZA World of Labor, Institute of Labor Economics (IZA), pages 385-385, July.
    57. Julie L. Hotchkiss & John C. Robertson, 2012. "Asymmetric labour force participation decisions," Applied Economics, Taylor & Francis Journals, vol. 44(16), pages 2065-2073, June.
    58. Lee, Jim, 2000. "The Robustness of Okun's Law: Evidence from OECD Countries," Journal of Macroeconomics, Elsevier, vol. 22(2), pages 331-356, April.
    59. Akiomi Kitagawa & Souichi Ohta & Hiroshi Teruyama, 2018. "The Changing Japanese Labor Market," Advances in Japanese Business and Economics, Springer, number 978-981-10-7158-4, July-Dece.
    60. Calvo, Guillermo & Coricelli, Fabrizio & Ottonello, Pablo, 2012. "The Labor Market Consequences of Financial Crises With or Without Inflation: Jobless and Wageless Recoveries," CEPR Discussion Papers 9218, C.E.P.R. Discussion Papers.
    61. 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.
    62. Ulf Rinne & Klaus Zimmermann, 2012. "Another economic miracle? The German labor market and the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-21, December.
    63. Robert J. Gordon, 2010. "Okun's Law and Productivity Innovations," American Economic Review, American Economic Association, vol. 100(2), pages 11-15, May.
    64. Herve Queneau & Amit Sen, 2008. "Evidence on the dynamics of unemployment by gender," Applied Economics, Taylor & Francis Journals, vol. 40(16), pages 2099-2108.
    65. Jong-seok Oh, 2018. "Changes in cyclical patterns of the USA labor market: from the perspective of nonlinear Okun’s law," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(2), pages 237-258, March.
    66. Nebot, César & Beyaert, Arielle & García-Solanes, José, 2019. "New insights into the nonlinearity of Okun's law," Economic Modelling, Elsevier, vol. 82(C), pages 202-210.
    67. Ho‐Chuan (River) Huang & Ya‐Kai Chang, 2005. "INVESTIGATING OKUN's LAW BY THE STRUCTURAL BREAK WITH THRESHOLD APPROACH: EVIDENCE FROM CANADA," Manchester School, University of Manchester, vol. 73(5), pages 599-611, September.
    68. Elroukh, Ahmed W. & Nikolsko-Rzhevskyy, Alex & Panovska, Irina, 2020. "A look at jobless recoveries in G7 countries," Journal of Macroeconomics, Elsevier, vol. 64(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ousama Ben-Salha & Zouhair Mrabet, 2019. "Is Economic Growth Really Jobless? Empirical Evidence from North Africa," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(4), pages 598-624, December.
    2. Shabir Mohsin Hashmi & Ali Gul Khushik & Muhammad Akram Gilal & Zhao Yongliang, 2021. "The Impact of GDP and Its Expenditure Components on Unemployment Within BRICS Countries: Evidence of Okun’s Law From Aggregate and Disaggregated Approaches," SAGE Open, , vol. 11(2), pages 21582440211, June.
    3. Giovanni Razzu & Carl Singleton, 2018. "Segregation and Gender Gaps in the United Kingdom's Great Recession and Recovery," Feminist Economics, Taylor & Francis Journals, vol. 24(4), pages 31-55, October.
    4. Martin Boďa & Mariana Považanová, 2020. "Formal and statistical aspects of estimating Okun's law at a regional level," Papers in Regional Science, Wiley Blackwell, vol. 99(4), pages 1113-1136, August.
    5. Guisinger, Amy Y. & Hernandez-Murillo, Ruben & Owyang, Michael T. & Sinclair, Tara M., 2018. "A state-level analysis of Okun's law," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 239-248.
    6. Durech, Richard & Minea, Alexandru & Mustea, Lavinia & Slusna, Lubica, 2014. "Regional evidence on Okun's Law in Czech Republic and Slovakia," Economic Modelling, Elsevier, vol. 42(C), pages 57-65.
    7. Jorge Belaire-Franch & Amado Peiró, 2015. "Asymmetry in the relationship between unemployment and the business cycle," Empirical Economics, Springer, vol. 48(2), pages 683-697, March.
    8. Kavese Kambale & Phiri Andrew, 2020. "A Provincial Perspective of Nonlinear Okun’s Law for Emerging Markets: The Case of South Africa," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 30(3), pages 59-76, September.
    9. Obst, Thomas, 2019. "A dynamic version of Okun's law in the EU15 countries - The role of delays in the unemployment-output nexus," Discussion Papers 411, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    10. Grant, Angelia L., 2018. "The Great Recession and Okun's law," Economic Modelling, Elsevier, vol. 69(C), pages 291-300.
    11. Antal, Miklós, 2014. "Green goals and full employment: Are they compatible?," Ecological Economics, Elsevier, vol. 107(C), pages 276-286.
    12. Giovanni Razzu & Carl Singleton, 2013. "Are Business Cycles Gender Neutral?," Economics Discussion Papers em-dp2013-07, Department of Economics, University of Reading.
    13. Abdessalem GOUIDER & Ridha NOUIRA & Faouzi SBOUI, 2018. "La relation croissance-chômage en Tunisie : validation de la spécification non linéaire de la loi d’Okun," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 47, pages 27-41.
    14. Giovanni Razzu & Carl Singleton, 2015. "Segregation and Gender Gaps through the UK's Great Recession," Economics Discussion Papers em-dp2015-02, Department of Economics, University of Reading.
    15. Giovanni Razzu & Carl Singleton, 2014. "Gender and the Business Cycle: A Stocks and Flows Analysis of US and UK Labour Market States," Economics Discussion Papers em-dp2014-10, Department of Economics, University of Reading.
    16. Roger, Perman & Jean-Philippe, Boussemart & Walter, Briec & Christophe, Tavéra, 2013. "How do technical change and technological distance influence the size of the Okun’s Law coefficient?," SIRE Discussion Papers 2013-60, Scottish Institute for Research in Economics (SIRE).
    17. Valadkhani, Abbas & Smyth, Russell, 2015. "Switching and asymmetric behaviour of the Okun coefficient in the US: Evidence for the 1948–2015 period," Economic Modelling, Elsevier, vol. 50(C), pages 281-290.
    18. de Mendonça, Helder Ferreira & de Oliveira, Diego S.P., 2019. "Firms' confidence and Okun's law in OECD countries," Economic Modelling, Elsevier, vol. 78(C), pages 98-107.
    19. Kim, Jun & Yoon, Jong Cheol & Jei, Sang Young, 2020. "An empirical analysis of Okun’s laws in ASEAN using time-varying parameter model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 540(C).
    20. Roger Perman & Gaetan Stephan & Christophe Tavéra, 2015. "Okun's Law—a Meta-analysis," Manchester School, University of Manchester, vol. 83(1), pages 101-126, January.

    More about this item

    Keywords

    Okun’s law; Difference version; Asymmetry; Output-unemployment regimes;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:69:y:2021:i:c:p:307-323. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.