Okun's Law in Selected European Countries (2005-2017): An Age and Gender Analysis

Abstract

ABSTRACT. In this paper the robustness of the Okun's relationship is tested using data from a group of selected European countries during the period 2005-2017, considering different age cohorts and gender. Four macroareas based on geographic location are also considered: Continental Europe, Nordic countries, Southern Europe, and Anglo-Saxon countries. Two traditional models are applied, the first difference and the "gap" one. The relevant data for the latter model is constructed from the HodrickPrescott filter. The empirical results indicate that an inverse relationship between unemployment and output holds for the whole sample and subsamples. Besides, it can be highlighted that these countries show smaller output loss associated with higher unemployment. Additionally, our findings suggest that the oldest population tends to be less exposed to the business cycles. Meanwhile, slight differences along countries and macro-areas are found. Therefore, as disparities in productivity growth are showed, different policies are required for each area. Actually, policymakers should design various ways to increase employment opportunities for diverse groups in society (specific coordinated policies for each necessity): those on specific age cohorts, those working in particular economic activities or those living in specific countries or macro-regions.