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An analysis of Okun’s law for the Spanish provinces

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  • Celia Melguizo

    () (Universitat de Barcelona)

Abstract

Abstract The inverse relationship between unemployment and Gross Domestic Product (GDP), commonly known as Okun’s law, has been traditionally analysed in the economic literature. Its application to Spain is particularly interesting due to the sharp effect that economic shocks have on unemployment. The purpose of this study is to analyse the relationship between unemployment and economic growth for the Spanish provinces between 1985 and 2013, a period characterized by economic booms and recessions that had a great impact on unemployment. After testing the time series properties of provincial GDP and unemployment, we specify and estimate the difference version of Okun’s law using VAR and panel VAR techniques. The obtained results point out that Spain’s provinces show large differences in their unemployment sensitivity to economic variations. In particular, provinces that show less diversified industries, a more developed services sector and higher rates of labour participation suffer from higher variations in unemployment rates.

Suggested Citation

  • Celia Melguizo, 2017. "An analysis of Okun’s law for the Spanish provinces," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 37(1), pages 59-90, February.
  • Handle: RePEc:spr:jahrfr:v:37:y:2017:i:1:d:10.1007_s10037-016-0110-7
    DOI: 10.1007/s10037-016-0110-7
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    Cited by:

    1. Celia Melguizo & Vicente Royuela, 2017. "“What drives migration moves across urban areas in Spain? Evidence from the Great Recession”," IREA Working Papers 201717, University of Barcelona, Research Institute of Applied Economics, revised Oct 2017.
    2. repec:ris:invreg:0375 is not listed on IDEAS
    3. Kavese, Kambale & Phiri, Andrew, 2018. "A provincial perspective of nonlinear Okun's law for emerging markets: The case of South Africa," MPRA Paper 86517, University Library of Munich, Germany.
    4. Bonaventura, Luigi & Cellini, Roberto & Sambataro, Mario, 2018. "Gender differences in Okun's law across the Italian regions," MPRA Paper 87557, University Library of Munich, Germany.
    5. Bande, Roberto & Martín-Román, Ángel, 2018. "Regional differences in the Okun’s Relationship: New Evidence for Spain (1980-2015)," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 41, pages 137-165.

    More about this item

    Keywords

    Okun’s law; Unemployment; Output fluctuations; Spanish provinces;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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