Economic Growth and Unemployment in Romania: Evidence from Okun’s Law and Jobless Growth (1994–2024)

This study examines the validity of Okun’s law in Romania over the period 1994–2024, with a particular focus on the sustainability and inclusiveness of economic growth. The empirical analysis uses annual data from the World Bank’s World Development Indicators and applies the differential form of Okun’s law, relating changes in the unemployment rate to real GDP growth. A baseline specification is estimated alongside an extended model that includes investment and inflation as macroeconomic controls. The results indicate a negative but weak relationship between economic growth and changes in the unemployment rate. Across all model specifications, the estimated Okun coefficients are small and statistically insignificant, suggesting limited labor market responsiveness to output growth. Including investment and inflation modestly improves the explanatory power of the model but does not fundamentally alter the results. Overall, the findings point to the prevalence of jobless growth, where economic expansion has not translated into substantial employment gains. The evidence suggests that economic growth in Romania over the past three decades has had a limited capacity to reduce unemployment. From a sustainability perspective, these findings highlight the importance of complementing growth-oriented strategies with structural and labor market policies aimed at strengthening the employment-generating potential of economic growth and supporting inclusive and sustainable development.