Okun's Law: Fit at Fifty?

Laurence Ball, Daniel Leigh and Prakash Loungani

No 18668, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper asks how well Okun's Law fits short-run unemployment movements in the United States since 1948 and in twenty advanced economies since 1980. We find that Okun's Law is a strong and stable relationship in most countries, one that did not change substantially during the Great Recession. Accounts of breakdowns in the Law, such as the emergence of "jobless recoveries," are flawed. We also find that the coefficient in the relationship - the effect of a one percent change in output on the unemployment rate - varies substantially across countries. This variation is partly explained by idiosyncratic features of national labor markets, but it is not related to differences in employment protection legislation.

JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-his and nep-mac
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Citations: View citations in EconPapers (42)

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