The present chapter starts out from the widely accepted view that employment is directly affected by the growth of economic activity. This is a central connection for both a characterization of empirical data and the identification of structural change, and for the conception of theoretical macroeconomic models dealing with policy issues. The basis for a discussion on the effects here involved is the statistical relationship between the variations of (un)employment and GDP which is well-known as Okun’s law (the seminal reference is Okun 1962). This law states that though employment rises with output, the changes are not one-to-one. Okun found that the GDP growth rate must be equal to its potential growth just to keep the unemployment rate constant, and more specifically that a one percent increase in output above its trend line would only lead to a 0.3 percentage decrease in the rate of unemployment.
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(2008). Linking Goods with Labor Markets: Okun’s Law and Beyond. In: Topics in Applied Macrodynamic Theory. Dynamic Modeling and Econometrics in Economics and Finance, vol 10. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-72542-8_5
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