What Lies beneath? A Sub-National Look at Okun’s Law in the United States

In my new paper with Nathalie Gonzalez Prieto and Saurabh Mishra, “We find that Okun’s Law holds quite well for most U.S. states but the Okun coefficient—the responsiveness of unemployment to output—varies substantially across states. We are able to explain a significant part of this cross-state heterogeneity on the basis of the state’s industrial structure. Our results have implications for the design of state and federal policies and may also be able to explain why Okun’s Lawat the national level has remained quite stable over time despite an enormous shift in the structure of the U.S. economy from manufacturing to services.”

Fig. 3 National-level employment elasticities


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Labels: Inclusive Growth


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