What Lies beneath? A Sub-National Look at Okun’s Law in the United States
Nathalie Gonzalez Prieto,
Prakash Loungani () and
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Nathalie Gonzalez Prieto: University of Maryland
Saurabh Mishra: University of Maryland
Open Economies Review, 2018, vol. 29, issue 4, 835-852
Abstract We find that Okun’s Law holds quite well for most U.S. states but the Okun coefficient—the responsiveness of unemployment to output—varies substantially across states. We are able to explain a significant part of this cross-state heterogeneity on the basis of the state’s industrial structure. Our results have implications for the design of state and federal policies and may also be able to explain why Okun’s Law at the national level has remained quite stable over time despite an enormous shift in the structure of the U.S. economy from manufacturing to services.
Keywords: Okun’s Law; Unemployment; US states; Cyclicality (search for similar items in EconPapers)
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