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Regional growth and unemployment: the validity of Okun's law for the Finnish regions

Author

Listed:
  • Aki Kangasharju

    (VATT - Government Institute for Economic Research, Helsinki - VATT)

  • Christophe Tavéra

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Peter Nijkamp

    (Spatial Economics - VU - Vrije Universiteit Amsterdam [Amsterdam])

Abstract

This paper offers a concise critical overview of Okun's Law, with particular attention for its relevance in open economic systems of regions. Based on an extensive set of economic data for Finnish regions, the existence of cointegration is tested using alternative statistical methods, viz. the residual-based test and the conditional error correction model. A novelty of the paper is to combine a method of hidden cointegrations with a method of removing cross-sectional dependence. After correcting for hidden cointegrations and cross-sectional dependence, both statistical methods used yield almost similar results and confirm the presence of cointegration for the relevant data on Finnish regions. The long-run Okun relationship for regions in Finland appears to confirm results found elsewhere in the literature on countries as a whole, although the coefficients tend to be smaller.

Suggested Citation

  • Aki Kangasharju & Christophe Tavéra & Peter Nijkamp, 2012. "Regional growth and unemployment: the validity of Okun's law for the Finnish regions," Post-Print halshs-00724237, HAL.
    • Handle: RePEc:hal:journl:halshs-00724237
    DOI: 10.1080/17421772.2012.694141
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    Cited by:

    1. Silvia Palombi & Roger Perman & Christophe Tavéra, 2017. "Commuting effects in Okun's Law among British areas: Evidence from spatial panel econometrics," Papers in Regional Science, Wiley Blackwell, vol. 96(1), pages 191-209, March.
    2. 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.
    3. Guisinger, Amy Y. & Hernandez-Murillo, Ruben & Owyang, Michael T. & Sinclair, Tara M., 2018. "A state-level analysis of Okun's law," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 239-248.
    4. Elhorst, J. Paul & Emili, Silvia, 2022. "A spatial econometric multivariate model of Okun's law," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    5. Durech, Richard & Minea, Alexandru & Mustea, Lavinia & Slusna, Lubica, 2014. "Regional evidence on Okun's Law in Czech Republic and Slovakia," Economic Modelling, Elsevier, vol. 42(C), pages 57-65.
    6. Roberto Bande & Ángel Martín-Román, 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.
    7. Rui Pereira, 2014. "Okun’s law, asymmetries and regional spillovers: evidence from Virginia metropolitan statistical areas and the District of Columbia," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(2), pages 583-595, March.
    8. Gina Cristina Dimian & Liviu Stelian Begu & Josef Jablonsky, 2017. "Unemployment and labour market mismatch in the European Union Countries," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 35(1), pages 13-44.
    9. Jorge Chica‐Olmo & Marina Checa‐Olivas, 2021. "Spatial impact of factors influencing the achievement of the Europa2020 employment targets," Papers in Regional Science, Wiley Blackwell, vol. 100(3), pages 633-649, June.
    10. Miquel Clar-Lopez & Jordi López-Tamayo & Raúl Ramos, 2014. "Unemployment forecasts, time varying coefficient models and the Okun’s law in Spanish regions," Economics and Business Letters, Oviedo University Press, vol. 3(4), pages 247-262.
    11. Maza, Adolfo & Hierro, Maria, 2025. "Delving into the FDI-economic growth relationship at the regional level: Headquarters effect in FDI data," International Review of Economics & Finance, Elsevier, vol. 97(C).
    12. Martin Boďa & Mariana Považanová, 2020. "Formal and statistical aspects of estimating Okun's law at a regional level," Papers in Regional Science, Wiley Blackwell, vol. 99(4), pages 1113-1136, August.
    13. Elena Vakulenko, 2015. "Analysis of the relationship between regional labour markets in Russia using Okun’s model," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 40(4), pages 28-48.

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