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The Rising Strength of Management, High Unemployment and Slow Growth: Revisiting Okun’s Law


  • Reich, Michael


Why is economic growth so slow and why are we having jobless recoveries? I address these questions here by revisiting Okun’s Law, focusing not just on its cyclical component but also upon its implied estimates of trend growth. Some observers argue that the rising strength of management (falling strength of labor) since the 1980s has led to a more volatile labor market and therefore to the decay of Okun’s Law. Using cross-state data since 1964 I examine whether Okun’s Law has changed in response to the decline of unionism. I find that the cyclical component of Okun’s Law does not need revision and that the trend growth component has declined moderately.

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  • Reich, Michael, 2012. "The Rising Strength of Management, High Unemployment and Slow Growth: Revisiting Okun’s Law," Institute for Research on Labor and Employment, Working Paper Series qt8sc8s1z1, Institute of Industrial Relations, UC Berkeley.
  • Handle: RePEc:cdl:indrel:qt8sc8s1z1

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    1. Samuel Bentolila & Juan J. Dolado & Pierre Cahuc & Thomas Le Barbanchon, 2010. "Two-Tier Labor Markets in the Great Recession: France Vs. Spain," Working Papers wp2010_1009, CEMFI.
    2. Weisskopf, Thomas E, 1979. "Marxian Crisis Theory and the Rate of Profit in the Postwar U.S. Economy," Cambridge Journal of Economics, Oxford University Press, vol. 3(4), pages 341-378, December.
    3. Katharine G. Abraham & James L. Medoff, 1984. "Length of Service and Layoffs in Union and Nonunion Work Groups," ILR Review, Cornell University, ILR School, vol. 38(1), pages 87-97, October.
    4. Katharine G. Abraham & Susan N. Houseman, 1995. "Labor Adjustment under Different Institutional Structures: A Case Study of Germany and the United States," Book chapters authored by Upjohn Institute researchers,in: Friedrich Buttler & Wolfgang Franz & Ronald Schettkat & David Soskice (ed.), Institutional Frameworks and Labor Market Performance: Comparative Views on the U.S. and German Economies, pages 285-315 W.E. Upjohn Institute for Employment Research.
    5. Katharine G. Abraham & Henry S. Farber, 1988. "Returns to Seniority in Union and Nonunion Jobs: A New Look at the Evidence," ILR Review, Cornell University, ILR School, vol. 42(1), pages 3-19, October.
    6. Reich, Michael, 2012. "Unemployment after the Great Recession: Why so High? What Can We Do?/El desempleo después de la Gran Recesión: ¿Por qué tan alto? ¿Qué podemos hacer?," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 30, pages 11-28, Abril.
    7. Edward S. Knotek & II, 2007. "How useful is Okun's law?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 73-103.
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    Social and Behavioral Sciences; High Unemployment; Slow Growth; Okun's Law;

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