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Open Economies Review

, Volume 29, Issue 4, pp 835–852 | Cite as

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

  • Nathalie Gonzalez Prieto
  • Prakash Loungani
  • Saurabh Mishra
Research Article

Abstract

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 Law at 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.

Keywords

Okun’s Law Unemployment US states Cyclicality 

References

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  6. Okun A (1962) Potential GNP, its measurement and significance. Yale University, Cowles FoundationGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • Nathalie Gonzalez Prieto
    • 1
  • Prakash Loungani
    • 2
    • 3
  • Saurabh Mishra
    • 1
  1. 1.University of MarylandCollege ParkUSA
  2. 2.IMFWashingtonUSA
  3. 3.OCP Policy CenterRabatMorocco

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