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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

    () (IMF
    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

    1. Davide Furceri & Ernesto Crivelli & Joël Toujas-Bernate, 2012. "Can Policies Affect Employment Intensity of Growth? A Cross-Country Analysis," IMF Working Papers 12/218, International Monetary Fund.
    2. Adil Mohommad & Anoop Singh & Sonali Jain-Chandra, 2012. "Inclusive Growth, Institutions, and the Underground Economy," IMF Working Papers 12/47, International Monetary Fund.
    3. 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, The World Bank, number 16092, June.
    4. Hassan, Mai & Schneider, Friedrich, 2016. "Size and Development of the Shadow Economies of 157 Countries Worldwide: Updated and New Measures from 1999 to 2013," IZA Discussion Papers 10281, Institute of Labor Economics (IZA).
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    Cited by:

    1. Zidong An & Tayeb Ghazi & Nathalie Gonzalez Prieto & Aomar Ibourk, 2019. "Growth and Jobs in Developing Economies: Trends and Cycles," Open Economies Review, Springer, vol. 30(5), pages 875-893, November.


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