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The relationship between output and unemployment in Scotland: A regional analysis

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  • Revoredo-Giha, Cesar
  • Leat, Philip M.K.
  • Renwick, Alan W.

Abstract

The relationship between unemployment and growth (i.e., the so-called Okun’s Law) has long standing in macroeconomics and regional economics. In this paper we estimate such a relationship for Scotland and at the Nomenclature of Territorial Units for Statistics (NUTS) level 3 regions using a panel dataset. The main motivations behind this interest are twofold: first, to test whether such a relationship exists in Scotland and how different these estimates are from those produced for the UK. Second, whether there exist regional differences in the estimates. The latter is particularly important in the context of the current budgetary cuts, which may affect both GDP growth and unemployment in different ways rural and urban areas. Results indicate that the Okun’s coefficient for Scotland is slightly higher than the one computed for the UK (1.7 Scotland versus 1.39 and 1.45 for the UK), and although an Okun relationship seemed to be valid for most of the regions, there were no statistical differences between rural and urban areas. However, as regards the effect of economic growth on unemployment, the results indicate a different and stronger effect in urban areas than in rural areas.

Suggested Citation

  • Revoredo-Giha, Cesar & Leat, Philip M.K. & Renwick, Alan W., 2012. "The relationship between output and unemployment in Scotland: A regional analysis," Working Papers 131465, Scotland's Rural College (formerly Scottish Agricultural College), Land Economy & Environment Research Group.
    • Handle: RePEc:ags:srlewp:131465
    DOI: 10.22004/ag.econ.131465
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    References listed on IDEAS

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    Cited by:

    1. KARGI, Bilal, 2014. "Okun’s Law and Long Term Co-Integration Analysis for OECD Countries (1987-2012)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 119, pages 77-85.
    2. Adegbemi Babatunde Onakoya & Adedotun SEYINGBO Victor, 2020. "Economic Growth and Unemployment Nexus: Okun’s Two-Version Case for Nigeria, South Africa and United States of America," Journal of Economics and Behavioral Studies, AMH International, vol. 12(1), pages 55-65.

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