Relationship between Economic Growth and Unemployment Rates in the Algerian Economy: Application of Okun’s Law during 1991–2019

This paper aims to examine the Algerian economy by applying Okun’s law to study the impact of real GDP on unemployment rates and examine the impact of labour market protection policies on Okun’s coefficients. The annual data on the Algerian economy for the period 1991–2019 were used. The autoregressive distributed lag (ARDL) bounds testing technique model was used in conjunction with the gap version for Okun’s coefficients. The empirical results show that Okun’s law operates in Algeria’s economy. Coefficients estimated using the gap version led to the conclusion that there was a negative and significant impact of the GDP gap on unemployment rates. Though there was a decline in unemployment as GDP increased, the rise in employment was very weak for each 1% increase in the GDP. These findings should be of significant interest to regulators and policymakers in the Algerian economy, practitioners and academic researchers, international and national investors, managers and any other groups interested in the labour market in the Algerian economy and the labour markets of other developing economies. The paper provides the real GDP’s effect on unemployment rates in Algeria by releasing the gap version for Okun’s coefficient. Also, it provides evidence that increased labour market protection mitigates the adverse effects of a decrease in output growth rate on employment.

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Revisiting Okun’s Law in European Union countries

Journal of Economic Studies ◽

10.1108/jes-05-2013-0063 ◽

2016 ◽

Vol 43 (2) ◽

pp. 275-287 ◽

Cited By ~ 8

Author(s):

Athina Economou ◽

Iacovos N. Psarianos

Keyword(s):

European Union ◽

Labor Market ◽

Output Growth ◽

Okun’S Law ◽

Content Type ◽

Unemployment Rates ◽

Okun's Law ◽

Market Protection ◽

European Union Countries ◽

Decomposition Models

Purpose – The purpose of this paper is to examine Okun’s Law in European countries by distinguishing between the transitory and the permanent effects of output changes upon unemployment and by examining the effect of labor market protection policies upon Okun’s coefficients. Design/methodology/approach – Quarterly data for 13 European Union countries, from the second quarter of 1993 until the first quarter of 2014, are used. Panel data techniques and Mundlak decomposition models are estimated. Findings – Okun’s Law is robust to alternative specifications. The effect of output changes to unemployment rates is weaker for countries with increased labor market protection expenditures and it is more persistent for countries with low labor market protection. Originality/value – The paper provides evidence that the permanent effect of output changes upon unemployment rates is quantitatively larger than the transitory impact. In addition, it provides evidence that increased labor market protection mitigates the adverse effects of a decrease in output growth rate upon unemployment.

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UNEMPLOYMENT AND ECONOMIC GROWTH IN NIGERIA: DOES OKUN’S LAW MATTERS?

Polonia University Scientific Journal ◽

10.23856/3203 ◽

2019 ◽

Vol 32 (1) ◽

pp. 26-37

Author(s):

Oluwaseyi Adedayo Adelowokan ◽

Adeteji Olusegun Оkutimiren

Keyword(s):

Economic Growth ◽

Population Growth ◽

Unemployment Rate ◽

Government Expenditure ◽

Output Growth ◽

Sustainable Growth ◽

Okun’S Law ◽

Okun's Law ◽

The Government ◽

The Impact

The situation in Nigeria is rapid population growth with high level of unemployment rate. The theoretical proposition of the Okun’s law suggests an indirect relationship existing between unemployment and output growth. This study tests the validity of Okun’s law by examining the impact of youth employment generation on sustainable growth in the Nigerian economy. We modeled real gross domestic product against unemployment rate, population growth, labour and government expenditure between 1986 and 2017. The empirical findings show that there is short- and long- run relationship existing between unemployment rate, population growth and output growth in Nigeria. Hence, study recommends that the activities by the government in promoting economic growth in the country should be geared towards promoting employment for the people in other sector.

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The Output Gap and Youth Unemployment: An Analysis Based on Okun’s Law

Economies ◽

10.3390/economies7040108 ◽

2019 ◽

Vol 7 (4) ◽

pp. 108

Author(s):

Mindaugas Butkus ◽

Janina Seputiene

Keyword(s):

Unemployment Rate ◽

Youth Unemployment ◽

Okun’S Law ◽

Equilibrium Unemployment ◽

Age And Gender ◽

Okun's Law ◽

And Gender ◽

The Impact ◽

Gender Specific ◽

Potential Level

The impact of economic fluctuations on the total unemployment rate is widely studied, however, with respect to age- and gender-specific unemployment, this relationship is not so well examined. We apply the gap version of Okun’s law, aiming to estimate youth unemployment rate sensitivity to output deviations from its potential level. Additionally, we aim to compare whether men or women have a higher equilibrium unemployment rate when output is at the potential level. Contrary to most studies on age- and gender-specific Okun’s coefficients, which assume that the effect of output on unemployment is homogenous, we allow a different effect to occur, depending on the output gap’s sign (positive/negative). The focus of the analysis is on 28 EU countries over the period of 2000–2018. The model is estimated by least squares dummy variable estimator (LSDV), using Prais–Winsten standard errors. We did not find evidence that higher equilibrium unemployment rates are more typical for men or for women. The estimates clearly show the equilibrium level of youth unemployment to be well above that of total unemployment, and this conclusion holds for both genders. We assess greater youth unemployment sensitivity to negative output shock, rather than to positive output shock, but when we take confidence intervals into consideration, this conclusion becomes less obvious.

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Labour Markets in the Global Financial Crisis: The Good, the Bad and the Ugly

National Institute Economic Review ◽

10.1177/002795011422800106 ◽

2014 ◽

Vol 228 ◽

pp. R58-R64 ◽

Cited By ~ 1

Author(s):

Mary C. Daly ◽

John G. Fernald ◽

Òscar Jordà ◽

Fernanda Nechio

Keyword(s):

Financial Crisis ◽

Labour Market ◽

Global Financial Crisis ◽

Technological Changes ◽

Okun’S Law ◽

Short Term ◽

Demand Shock ◽

Okun's Law ◽

Global Demand ◽

The Global Financial Crisis

This note examines labour market performance across countries through the lens of Okun's Law. We find that after the 1970s but prior to the global financial crisis of the 2000s, the Okun's Law relationship between output and unemployment became more homogenous across countries. These changes presumably reflected institutional and technological changes. But, at least in the short term, the global financial crisis undid much of this convergence, in part because the affected countries adopted different labour market policies in response to the global demand shock.

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Output Growth Volatility and Remittances: The Case of ECOWAS

International Journal of Social Science Research ◽

10.5296/ijssr.v6i2.12647 ◽

2018 ◽

Vol 6 (2) ◽

pp. 23

Author(s):

Deekor Leelee Nwibari ◽

Gbanador Clever A.

Keyword(s):

Generalized Method Of Moments ◽

Well Being ◽

Output Growth ◽

Set Covering ◽

Annual Data ◽

Output Volatility ◽

Data Set ◽

Left Behind ◽

The Impact ◽

Growth Volatility

The study on output growth volatility and remittances: the case of ECOWAS is to determine the impact of remittances on output growth volatility. To achieve this, the study adopts the theory of altruism which posits that the migrant derives a positive utility from the well-being of the family left behind. A panel annual data set covering 15 remittances recipient ECOWAS member nations for the period ranging from 1995 to 2015 were utilized. The study utilizes a panel system Generalized Method of Moments (GMM) technique and both the static and dynamic panel estimation approaches to examine the impact of remittances on growth volatility. Results show that remittances appear to be inducing output volatility in ECOWAS member countries. As a result, the study suggests among others, the encouragement of policies that will foster increasing influx of remittances to the region by the concern authorities in order to stabilize volatility of any form in the region.

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Do IMF forecasts respect Okun’s law? Evidence for advanced and developing economies

International Journal of Forecasting ◽

10.1016/j.ijforecast.2019.03.001 ◽

2019 ◽

Vol 35 (3) ◽

pp. 1131-1142 ◽

Cited By ~ 1

Author(s):

Zidong An ◽

Laurence Ball ◽

Joao Jalles ◽

Prakash Loungani

Keyword(s):

Developing Economies ◽

Okun’S Law ◽

Okun's Law

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The Validity of Okun’s Law in North Macedonia

Business and Economic Research ◽

10.5296/ber.v9i2.14659 ◽

2019 ◽

Vol 9 (2) ◽

pp. 160

Author(s):

Despina Tumanoska

Keyword(s):

Youth Unemployment ◽

Econometric Analysis ◽

Gdp Growth ◽

Okun’S Law ◽

Unemployment Rates ◽

Okun's Law ◽

Long Run ◽

Using Data ◽

The Relationship ◽

Auto Regression

This paper investigates the relationship between unemployment rates (youth and total) and GDP growth in North Macedonia, within the context of Okun’s Law. The econometric analysis of the paper is based on The Auto-regression Distributed Lags Model, using data for the period 1991-2017 collected from different data basis. The econometric analysis suggests that there is a statistically significant long-run relationship between the GDP growth and total unemployment in North Macedonia, at the 1% level of probability. In particular, the findings show that a 1% increase in the economic growth will lead to decrease of the total unemployment for 2.57%. No short- or long-run relationship between GDP growth and youth unemployment was detected.

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Macroeconomic Risk and Political Stability: Perspectives from Emerging and Developing Economies

Global Business Review ◽

10.1177/09721509211047650 ◽

2021 ◽

pp. 097215092110476

Author(s):

Rexford Abaidoo ◽

Elvis Agyapong

Keyword(s):

Rule Of Law ◽

Developing Economies ◽

Generalized Method Of Moments ◽

Political Stability ◽

Output Growth ◽

Sub Saharan Africa ◽

Coefficient Estimates ◽

Macroeconomic Risk ◽

Empirical Estimates ◽

The Impact

This study examines the impact of macroeconomic risk on political stability, using data compiled from 38 countries in the sub-region of sub-Saharan Africa (SSA), from 1996 to 2018. Macroeconomic risk index employed in this study is constructed using principal component analysis (PCA) from key economic variables. Empirical estimates verifying the relationship in question are conducted using the two-step system generalized method of moments (TS-SGMM) estimation technique. Presented empirical estimates suggest that macroeconomic risk has an adverse impact on political stability, all things being equal. Reported coefficient estimates further suggest that improvement in rule of law among economies in the sub-region significantly moderates the negative impact exerted on the political environment by macroeconomic risk. Coefficient estimates additionally suggest that improvement in governance and institutional variables (corruption control, government effectiveness, regulatory quality and rule of law) augment efforts at promoting political stability even in an environment characterized by volatile output growth.

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