The relationship between output and unemployment in Scotland: A regional analysis

Cesar Revoredo-Giha, Philip M.K. Leat and Alan Renwick

No 131465, Working Papers from Scotland's Rural College (formerly Scottish Agricultural College), Land Economy & Environment Research Group

Abstract: The relationship between unemployment and growth (i.e., the so-called Okun’s Law) has long standing in macroeconomics and regional economics. In this paper we estimate such a relationship for Scotland and at the Nomenclature of Territorial Units for Statistics (NUTS) level 3 regions using a panel dataset. The main motivations behind this interest are twofold: first, to test whether such a relationship exists in Scotland and how different these estimates are from those produced for the UK. Second, whether there exist regional differences in the estimates. The latter is particularly important in the context of the current budgetary cuts, which may affect both GDP growth and unemployment in different ways rural and urban areas. Results indicate that the Okun’s coefficient for Scotland is slightly higher than the one computed for the UK (1.7 Scotland versus 1.39 and 1.45 for the UK), and although an Okun relationship seemed to be valid for most of the regions, there were no statistical differences between rural and urban areas. However, as regards the effect of economic growth on unemployment, the results indicate a different and stronger effect in urban areas than in rural areas.

Keywords: Labor and Human Capital; Public Economics (search for similar items in EconPapers)
Pages: 16
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:srlewp:131465

DOI: 10.22004/ag.econ.131465

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