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Does One Law Fit All? Cross-Country Evidence on Okun’s Law


  • Laurence Ball

    (Johns Hopkins University)

  • Davide Furceri

    (University of Palermo

  • Daniel Leigh


  • Prakash Loungani

    Policy Center for the New South)


This paper compares the performance of Okun’s Law in advanced and developing economies. On average, the Okun coefficient—which measures the short-run responsiveness of labor markets to output fluctuations—is about half as large in developing as in advanced countries. However, there is considerably heterogeneity across countries, with Okun’s Law fitting quite well for a number of developing countries. We have limited success in explaining the reasons for this heterogeneity. The mean unemployment rate and the share of services in GDP are associated with the Okun coefficient, whereas other factors such as indices of overall labor and product market flexibility do not appear to play a consistent role.

Suggested Citation

  • Laurence Ball & Davide Furceri & Daniel Leigh & Prakash Loungani, 2019. "Does One Law Fit All? Cross-Country Evidence on Okun’s Law," Open Economies Review, Springer, vol. 30(5), pages 841-874, November.
  • Handle: RePEc:kap:openec:v:30:y:2019:i:5:d:10.1007_s11079-019-09549-3
    DOI: 10.1007/s11079-019-09549-3

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    References listed on IDEAS

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    5. Steven Kapsos, 2006. "The Employment Intensity of Growth: Trends and Macroeconomic Determinants," Palgrave Macmillan Books, in: Jesus Felipe & Rana Hasan (ed.), Labor Markets in Asia, chapter 0, pages 143-201, Palgrave Macmillan.
    6. World Bank, 2013. "World Development Report 2014 [Informe sobre el desarrollo mundial 2014, Riesgo y oportunidad : la administración del riesgo como instrumento de desarrollo - Panorama general]," World Bank Publications - Books, The World Bank Group, number 16092, December.
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    3. Guénette, Justin Damien & Kose, M. Ayhan & Sugawara, Naotaka, 2022. "Is a Global Recession Imminent?," MPRA Paper 114627, University Library of Munich, Germany.
    4. Porras-Arena, M. Sylvina & Martín-Román, Ángel L., 2022. "The heterogeneity of Okun's law: A metaregression analysis," GLO Discussion Paper Series 1069, Global Labor Organization (GLO).
    5. Hawkins, Raymond J. & Li, Yichu, 2021. "Okun loops and anelastic relaxation in the G7," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 576(C).
    6. Md. Noman Siddikee & Jawadur Rahim Zahid & Athya Sanjida & Polina Oshchepkova, 2022. "Sustainable economic growth and unemployment nexus of SDG 2030: Bangladesh in Asia," SN Business & Economics, Springer, vol. 2(1), pages 1-20, January.
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    8. Kiss, Tamas & Nguyen, Hoang & Österholm, Pär, 2022. "Modelling Okun’s Law – Does non-Gaussianity Matter?," Working Papers 2022:1, Örebro University, School of Business.
    9. Porras-Arena, M. Sylvina & Martín-Román, Ángel L. & Dueñas Fernández, Diego & Llorente Heras, Raquel, 2022. "Okun’s Law: The effects of the COVID-19 pandemic and the temporary layoffs procedures (ERTE) on Spanish regions," MPRA Paper 115530, University Library of Munich, Germany.
    10. Karlsson, Sune & Österholm, Pär, 2020. "A hybrid time-varying parameter Bayesian VAR analysis of Okun’s law in the United States," Economics Letters, Elsevier, vol. 197(C).
    11. M. Sylvina Porras-Arena & Mauricio A. Suárez Cal, 2021. "What’s behind Okun’s law? A multiple equation approach to the Uruguayan labour market," Documentos de Trabajo (working papers) 21-30, Instituto de Economía - IECON.
    12. Mindaugas Butkus & Kristina Matuzeviciute & Dovile Rupliene & Janina Seputiene, 2020. "Does Unemployment Responsiveness to Output Change Depend on Age, Gender, Education, and the Phase of the Business Cycle?," Economies, MDPI, vol. 8(4), pages 1-29, November.
    13. Davide Furceri & João Tovar Jalles & Prakash Loungani, 2020. "On the Determinants of the Okun’s Law: New Evidence from Time-Varying Estimates," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(4), pages 661-700, December.
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