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Sectoral Okun's Law and Cross-Country Cyclical Differences

Eiji Goto () and Constantin Bürgi

No 8101, CESifo Working Paper Series from CESifo

Abstract: We estimate Okun’s law, the negative relationship between output and the unemployment rate, at the sector level for the US, the UK, Japan, and Switzerland to test several hypotheses that may explain why the aggregate Okun’s coeffcients are different across countries. Specifically, we show that the sectoral composition is not a driver and find that the sectoral coefficients are proportional to the aggregate in all four countries. We also show that the standard deviation of unemployment is the main driver of the cross-country differences. This is consistent with labor market policies being crucial to explain the cross-country cyclical differences in the aggregate Okun’s coefficient.

Keywords: Okun’s law; cross-country differences; sectors (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-eec, nep-lab and nep-mac
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Working Paper: Sectoral Okun’s Law and Cross-Country Cyclical Differences (2019) Downloads
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