The Unassuming Economist

From a paper by Óscar Peláez-Herreros:

“The paper develops a decomposition of the Okun coefficient that allows us to know what part of its value is due to the direct effect of real GDP growth on the unemployment rate and what other part is due to the indirect effects through variations in: production per hour, hours worked per employed person, participation rate, and population. The procedure applies to the 38 OECD states with annual data from 1995 to 2019. The results show large differences between states in the Okun coefficients and in their component factors. However, there are also groups of countries that share dynamics. The advantage of the proposed technique is that it identifies the factors that cause differences and helps to adopt macroeconomic policies more appropriate to each case.”