Okun’s Law, development, and demographics: differences in the cyclical sensitivities of unemployment across economy and worker groups

Zidong An, John Bluedorn and Gabriele Ciminelli

Applied Economics, 2022, vol. 54, issue 36, 4227-4239

Abstract: The negative and stable relationship between an economy’s aggregate demand conditions and overall unemployment is well-documented. We show that there is a large degree of heterogeneity in the cyclical sensitivities of unemployment across worker and economy groups. First, unemployment is more than twice as sensitive to aggregate demand in advanced as in emerging market and developing economies. Second, youth’s unemployment is twice as sensitive as that of adults’. Third, women’s unemployment is significantly less sensitive to demand than men’s in advanced economies. We also present evidence that the cyclical sensitivity of unemployment during the 2020 COVID-19 recession decreased in advanced economies, but not emerging market and developing economies. Together, these findings point to the highly unequal impacts of the business cycle across worker and economy groups.

Date: 2022
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Working Paper: Okun's Law, Development, and Demographics: Differences in the Cyclical Sensitivities of Unemployment Across Economy and Worker Groups (2021)
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DOI: 10.1080/00036846.2022.2027333

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