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Okun’s Laws Differentiated by Education

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  • Askenazy, Philippe
  • Chevalier, Martin
  • Erhel, Christine

Abstract

Our aim in this note is to set Okun’s Law in a new perspective. We argue that highly educated labour should react differently to economic downturns and recoveries than lesser-educated labour. A simple model shows that when highly educated workers are engaged in long-run projects, the adjustments of their (un)employment to GDP changes become ambiguous. If the access to capital is not too affected by the cycle, these adjustements can be the opposite of the employment changes of the lesser- educated workforce. Estimations for the United States, the European Union and across Europe support the coexistence of different Okun’s laws according to educational attainment. This observation may help to explain recent puzzling macroeconomic facts.

Suggested Citation

  • Askenazy, Philippe & Chevalier, Martin & Erhel, Christine, 2015. "Okun’s Laws Differentiated by Education," CEPREMAP Working Papers (Docweb) 1514, CEPREMAP.
  • Handle: RePEc:cpm:docweb:1514
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    File URL: http://www.cepremap.fr/depot/docweb/docweb1514.pdf
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    Cited by:

    1. Askenazy, Philippe & Erhel, Christine, 2015. "The French Productivity Puzzle," IZA Discussion Papers 9188, Institute for the Study of Labor (IZA).

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    Keywords

    Okun; low-middle educated; high-educated; business cycle;

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