Okun’s law and digitalization in ASEAN-10 economies

From a paper by Martin Boďa, Mariana Považanová, and Katarína Vitálišová:

“Whilst the economic success of ASEAN countries is frequently attributed to the transformation of their economies towards digitalization and technical innovation, little is known about the unemployment-output behaviour of ASEAN economies in the course of the business cycle. One aspect of this conjunctural behaviour is studied in this chapter in the hope of providing insights into how the unemployment-output relationship–enacted in Okun’s law––unfolds in conjunction with the structural changes of their economies and other factors. A two-stage procedure is applied to that end. First, for a period of three decades, 1991–2022, a time-varying version of Okun’s law is estimated for each ASEAN economy. Second, the estimated Okun coefficients are matched against a set of explanatory variables including various metrics of digitalization, sectoral and labour market characteristics. The results indicate that in the majority of ASEAN economies unemployment was mostly insensitive to output, or that the unemployment-output relationship was constant and otherwise of a negligible magnitude, which corroborates the resilience of economic growth in the Southeast Asian region. Nonetheless, this sensitivity is heightened by the reorientation towards medium and high-tech industries whilst the adoption of digital technologies by the population has actually no effect per se.”

Posted by at 7:48 PM

Labels: Inclusive Growth

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