Economic Growth and Unemployment Nexus: Okun’s Two-Version Case for Nigeria, South Africa and United States of America
Keywords:
Okun's Law, GDP growth, Unemployment rate, Difference version, Dynamic version
Abstract
Okun’s law in its original form was predicated on the experience in the United States of America. Some methodological refinements have been added based on studies conducted in other climes with varied results. This research investigated the applicability of this law in Nigeria, South Africa and the United States of America. The study conducted a comparative analysis of three of the versions of the law. The research employed Ordinary Least Squares method having validated it’s appropriateness with Dickey-Fuller and Philips-Perron tests. The demonstrated superiority of the dynamic version over the difference version was manifest in all the countries. The result also showed that the dynamic version of the law was applicable in the three nations while the difference version showed the lack of linkage between economic growth and unemployment only in Nigeria. Deployment of employment creative employment schemes, labour market reform and economic restructuring are recommended in the Nigerian case. The policy makers on South Africa and USA are enjoined to pursue growth- inducing policies.
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References
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Adawo, M. A., Essien, E. B. & Ekpo, N. U. (2012). Is Nigeria’s unemployment problem unsolvable? Current Research Journal of Social Sciences, 4(6), 389-395,
Amassoma, D. & Nnwosa, P. I. (2013). The Impact of Unemployment Rate on Productivity Growth in Nigeria: An Error Correction Modeling Approach, Journal of Economics and Sustainable Development, 4 (9), 90-103
Arewa, A. & Nwakanma, P. C. (2012) Potential-real DDP Relationship and growth process of Nigerian economy: An empirical re-evaluation of Okun’s law. European Scientific Journal. May edition, 8(9), 1857 – 7881.
Ball, L, D Leigh, and P Loungani (2017), “Okun’s law: Fit at 50?” Journal of Money, Credit and Banking 49(7), 1413-1441.
Ball, L., Leigh, D. & Loungani, P. (2012). Okun’s law: Fit at 50? Paper presented at the 13th Jacques Polak Annual Research Conference. Hosted by the International Monetary Fund Washington, DC, November 8–9.
Bankole, A.S & Basiru O. F (2013). Empirical test of Okun’s law in Nigeria. International Journal of Economic Practices and Theories, 3(3), 227 -231
Beaton, K. (2010). Time variation in Okun’s law: A Canada and U.S. comparison. Working Paper/Document de travail 2010-7. Retrieved from http://www.bankofcanada.ca/wp-
Bernanke, B.S. (2012). Recent developments in the labour market. Speech by Governor federal Reserve bank at the National Association for Business Economics Annual Conference, Arlington, Virginia. Retrieved from http://www.federalreserve.gov/newsevents/speech/ bernanke20120326a.htm
Burda, M. C., & Hunt, J. (2011). What explains the German labour market miracle in the Great Recession? National Bureau of Economic Research, No. 17187.
Cazes, S, S Verick, and F Al Hussmi (2013), “Why did unemployment respond so differently to the global financial crisis across countries? Insights from Okun’s Law”, IZA Journal of Labor Policy 2: 1-18.
Crespo-Cuaresma, J. (2003). Revisiting Okun’s law: A piecewise-linear approach. Oxford Bulletin of Economics and Statistics 65, 439-451.
Dritsaki, C. & Dritsakis, N. (2009). Okun’s coefficient for four Mediterranean member countries of E.U: An empirical study, International Journal of Business and Management, 4(5), 18-26
Dwivedi, D. N. (2001). Macroeconomics: Theory and Policy, New Delhi: Tata McGraw-Hill.
Fasanya, I .O. Onakoya, A.B.O & Adabanija, M. A. (2013). Oil discovery and sectoral performance in Nigeria: An appraisal of the Dutch disease. IUP Journal of Applied Economics, 12(2), 25-40.
Friedman, B. M. & Wachter, M. (1974). Unemployment: Okun's Law, labour force, and productivity, The Review of Economics and Statistics, 56 (2), 167-176.
Geldenhuys J. & Marinkov, M. (2007). Robust estimates of Okun's coefficient for South Africa. Economic Research Working Papers 55, Southern Africa.
Gordon, R. J. (1984). Unemployment and potential output in the 1980’s, Brookings Papers Economic Activity 15, 537–564.
Harris, R., & Silverstone, B. (2001). Testing for asymmetry in Okun’s law: A cross-country comparison. Economics Bulletin, 5, 1–13.
Hodrick, R. & Prescott, E.C. (1997). Postwar U.S. business cycles: An empirical investigation, Journal of Money, Credit, and Banking, 29 (1), 1–16
Huang, H-C. & Chang, Y-K. (2005). Investigating Okun’s law by the structural break with thresh old Approach: Evidence from Canada, The Manchester School, 73(5), 599-611.
IMF (2010). Unemployment Dynamics in Recessions and Recoveries. World Economic Outlook, Chapter 3, April.
Javeid U. (2012) Okun's Law: Empirical evidence from Pakistan (1981-2005). Thesis; Södertörn University, School of Social Sciences. http://urn.kb.se/resolve?urn=urn:nbn:se:sh:diva-16168.
Jumah, A and Kunst, R. M. (2007). Agriculture and Economic Growth in Africa Revisited: A Modified Okun's Law, Paper Presented at the Twelfth Annual Conference on Econometric Modelling for Africa, Cape Town, South Africa, July 4-6.
Kamgnia D. B. (2009). Growth intensity of employment in Africa: A panel data approach. Applied Econometrics and International Development, 9(2), 163 - 174
Kirk, D. (2011). The primary cause of structural unemployment in South Africa: Poor education standards and policy. Retrieved from http://www.twentythreefour.co.za/structural unemployment
Knoester, A. (1986). Okun’s law revisited, WeltwirtschaflichesArchiv122 (4), 657–666.
Knotek, E. S. (2007). How useful is Okun's Law? Economic Review, Federal Reserve Bank of Kansas City, Fourth Quarter, 73–103.
Kooros, S. (2006). In search of a general unemployment model, International Research Journal of Finance and Economics, 4, 184–201.
Kwami, A. (2005). A cross – province comparison of Okun’s coefficient for Canada, Applied Economics, 37, 561-570.
Lal, I., Muhammad, S.D., Jalil, M.A., and Adnan, A. (2010). Test of Okun’s law in some Asian countries co-integration approach. European Journal of Scientific Research, 40 (1), 73-80.
Lee, J. (2000). The robustness of Okun’s law: Evidence from OECD Countries, Journal of
Macroeconomics, 22(2), 331-56.
Lim, G., Dixon, R. & Ours, J. (2019). Beyond Okun’s law: Introducing labour market flows, VOX CEPR Policy Portal. CEPR Discussion Paper 13369. Retrieved from https://voxeu.org/article/beyond-okun-s-law-introducing-labour-market-flows
Loungani, P. (2010). The global unemployment crisis: costs, causes, cures: How to fight the misery index effectively, especially double-digit unemployment rates? Posted on the globalist, November 15, Retrieved from www.globalist.com.
McKinsey Global Institute. (2011). An economy that works: Job creation and America’s future, June report.
Mielcová, E. (2011). Economic growth and unemployment rate of the transition country - The case of the Czech republic 1996-2009, Ekonomie a management, l (14), 29-37.
Mosikari, T. J. (2013).The effect of unemployment rate on gross domestic product: Case of South Africa, Mediterranean Journal of Social Sciences, 4 (6), 429 - 434.
Moosa, I. (1997). A Cross-country comparison of Okun’s coefficient, Journal of Comparative
Economics 24(3), 335-356.
National Bureau of Statistics (2018). Retrieved from http//www.nigerianstat.gov.ng /index.php// sectorStatistics
National Treasury (2018). Confronting youth unemployment: Policy options for South Africa. Discussion Paper for Public Comment
Njoku, C. N. and Ihugba, O. A. (2011). Unemployment and Nigerian Economic Growth (1985- 2009), Mediterranean Journal of Social Sciences, 2 (6), pp 23-32
Okun, M. (1962). Potential GNP, its measurement and significance, Cowles Foundation, Yale University, http://cowles.econ.yale.edu/P/cp/p01b/p0190.pdf
Owyang, M T, and T Sekhposyan (2012), “Okun’s Law of the business cycle: was the Great Recession all that different?”, Federal Reserve Bank of St. Louis Review 94(5): 399-418.
Prachowny, M. F. J. (1993). Okun's law: Theoretical foundations and revised estimates, The Review of Economics and Statistics, 75(2), 331-336
Revoredo-Giha. C., Leat, P. & Renwick, A. (2012). The relationship between output and unemployment in Scotland: A regional analysis. Land Economy Working Paper Series, Number: 65, EH9 3J
Sanusi, A. R. (2012). Macroeconomic policy, output and unemployment dynamics in Nigeria: Is there evidence of jobless growth? Paper presented at the 53rd Annual Conference of the Nigerian Economics Society on Youth Employment and Poverty Reduction in Nigeria held at NICON Luxury Hotel, Abuja between 27th and 30th August
Silvapulle, P., Moosa, I. A., Silvapulle, M. J. (2004). Asymmetry in Okun's Law, Canadian Journal of Economics, 37(2), 353-374.
Sögner, L. and Stiassny, A. (2002). An analysis on the structural stability of Okun’s law: A cross-country study, Applied Economics, 14, 1775-87.
Soylu, Ö. B.,Çakmak, I., & Okur, F.(2018).Economic growth and unemployment issue: Panel data analysis in Eastern European Countries. Journal of International Studies, 11(1), 93-107. doi:10.14254/2071-8330.2018/11-1/7
Stephan, G. (2012). The relationship between output and unemployment in France and United Kingdom. University of Rennes, April (Preliminary draft)
World Development Indicators - World Bank Data Catalog (2018). Unemployment. Retrieved from https: datacatalog.worldbank.org › dataset › world-development-indicators
Adawo, M. A., Essien, E. B. & Ekpo, N. U. (2012). Is Nigeria’s unemployment problem unsolvable? Current Research Journal of Social Sciences, 4(6), 389-395,
Amassoma, D. & Nnwosa, P. I. (2013). The Impact of Unemployment Rate on Productivity Growth in Nigeria: An Error Correction Modeling Approach, Journal of Economics and Sustainable Development, 4 (9), 90-103
Arewa, A. & Nwakanma, P. C. (2012) Potential-real DDP Relationship and growth process of Nigerian economy: An empirical re-evaluation of Okun’s law. European Scientific Journal. May edition, 8(9), 1857 – 7881.
Ball, L, D Leigh, and P Loungani (2017), “Okun’s law: Fit at 50?” Journal of Money, Credit and Banking 49(7), 1413-1441.
Ball, L., Leigh, D. & Loungani, P. (2012). Okun’s law: Fit at 50? Paper presented at the 13th Jacques Polak Annual Research Conference. Hosted by the International Monetary Fund Washington, DC, November 8–9.
Bankole, A.S & Basiru O. F (2013). Empirical test of Okun’s law in Nigeria. International Journal of Economic Practices and Theories, 3(3), 227 -231
Beaton, K. (2010). Time variation in Okun’s law: A Canada and U.S. comparison. Working Paper/Document de travail 2010-7. Retrieved from http://www.bankofcanada.ca/wp-
Bernanke, B.S. (2012). Recent developments in the labour market. Speech by Governor federal Reserve bank at the National Association for Business Economics Annual Conference, Arlington, Virginia. Retrieved from http://www.federalreserve.gov/newsevents/speech/ bernanke20120326a.htm
Burda, M. C., & Hunt, J. (2011). What explains the German labour market miracle in the Great Recession? National Bureau of Economic Research, No. 17187.
Cazes, S, S Verick, and F Al Hussmi (2013), “Why did unemployment respond so differently to the global financial crisis across countries? Insights from Okun’s Law”, IZA Journal of Labor Policy 2: 1-18.
Crespo-Cuaresma, J. (2003). Revisiting Okun’s law: A piecewise-linear approach. Oxford Bulletin of Economics and Statistics 65, 439-451.
Dritsaki, C. & Dritsakis, N. (2009). Okun’s coefficient for four Mediterranean member countries of E.U: An empirical study, International Journal of Business and Management, 4(5), 18-26
Dwivedi, D. N. (2001). Macroeconomics: Theory and Policy, New Delhi: Tata McGraw-Hill.
Fasanya, I .O. Onakoya, A.B.O & Adabanija, M. A. (2013). Oil discovery and sectoral performance in Nigeria: An appraisal of the Dutch disease. IUP Journal of Applied Economics, 12(2), 25-40.
Friedman, B. M. & Wachter, M. (1974). Unemployment: Okun's Law, labour force, and productivity, The Review of Economics and Statistics, 56 (2), 167-176.
Geldenhuys J. & Marinkov, M. (2007). Robust estimates of Okun's coefficient for South Africa. Economic Research Working Papers 55, Southern Africa.
Gordon, R. J. (1984). Unemployment and potential output in the 1980’s, Brookings Papers Economic Activity 15, 537–564.
Harris, R., & Silverstone, B. (2001). Testing for asymmetry in Okun’s law: A cross-country comparison. Economics Bulletin, 5, 1–13.
Hodrick, R. & Prescott, E.C. (1997). Postwar U.S. business cycles: An empirical investigation, Journal of Money, Credit, and Banking, 29 (1), 1–16
Huang, H-C. & Chang, Y-K. (2005). Investigating Okun’s law by the structural break with thresh old Approach: Evidence from Canada, The Manchester School, 73(5), 599-611.
IMF (2010). Unemployment Dynamics in Recessions and Recoveries. World Economic Outlook, Chapter 3, April.
Javeid U. (2012) Okun's Law: Empirical evidence from Pakistan (1981-2005). Thesis; Södertörn University, School of Social Sciences. http://urn.kb.se/resolve?urn=urn:nbn:se:sh:diva-16168.
Jumah, A and Kunst, R. M. (2007). Agriculture and Economic Growth in Africa Revisited: A Modified Okun's Law, Paper Presented at the Twelfth Annual Conference on Econometric Modelling for Africa, Cape Town, South Africa, July 4-6.
Kamgnia D. B. (2009). Growth intensity of employment in Africa: A panel data approach. Applied Econometrics and International Development, 9(2), 163 - 174
Kirk, D. (2011). The primary cause of structural unemployment in South Africa: Poor education standards and policy. Retrieved from http://www.twentythreefour.co.za/structural unemployment
Knoester, A. (1986). Okun’s law revisited, WeltwirtschaflichesArchiv122 (4), 657–666.
Knotek, E. S. (2007). How useful is Okun's Law? Economic Review, Federal Reserve Bank of Kansas City, Fourth Quarter, 73–103.
Kooros, S. (2006). In search of a general unemployment model, International Research Journal of Finance and Economics, 4, 184–201.
Kwami, A. (2005). A cross – province comparison of Okun’s coefficient for Canada, Applied Economics, 37, 561-570.
Lal, I., Muhammad, S.D., Jalil, M.A., and Adnan, A. (2010). Test of Okun’s law in some Asian countries co-integration approach. European Journal of Scientific Research, 40 (1), 73-80.
Lee, J. (2000). The robustness of Okun’s law: Evidence from OECD Countries, Journal of
Macroeconomics, 22(2), 331-56.
Lim, G., Dixon, R. & Ours, J. (2019). Beyond Okun’s law: Introducing labour market flows, VOX CEPR Policy Portal. CEPR Discussion Paper 13369. Retrieved from https://voxeu.org/article/beyond-okun-s-law-introducing-labour-market-flows
Loungani, P. (2010). The global unemployment crisis: costs, causes, cures: How to fight the misery index effectively, especially double-digit unemployment rates? Posted on the globalist, November 15, Retrieved from www.globalist.com.
McKinsey Global Institute. (2011). An economy that works: Job creation and America’s future, June report.
Mielcová, E. (2011). Economic growth and unemployment rate of the transition country - The case of the Czech republic 1996-2009, Ekonomie a management, l (14), 29-37.
Mosikari, T. J. (2013).The effect of unemployment rate on gross domestic product: Case of South Africa, Mediterranean Journal of Social Sciences, 4 (6), 429 - 434.
Moosa, I. (1997). A Cross-country comparison of Okun’s coefficient, Journal of Comparative
Economics 24(3), 335-356.
National Bureau of Statistics (2018). Retrieved from http//www.nigerianstat.gov.ng /index.php// sectorStatistics
National Treasury (2018). Confronting youth unemployment: Policy options for South Africa. Discussion Paper for Public Comment
Njoku, C. N. and Ihugba, O. A. (2011). Unemployment and Nigerian Economic Growth (1985- 2009), Mediterranean Journal of Social Sciences, 2 (6), pp 23-32
Okun, M. (1962). Potential GNP, its measurement and significance, Cowles Foundation, Yale University, http://cowles.econ.yale.edu/P/cp/p01b/p0190.pdf
Owyang, M T, and T Sekhposyan (2012), “Okun’s Law of the business cycle: was the Great Recession all that different?”, Federal Reserve Bank of St. Louis Review 94(5): 399-418.
Prachowny, M. F. J. (1993). Okun's law: Theoretical foundations and revised estimates, The Review of Economics and Statistics, 75(2), 331-336
Revoredo-Giha. C., Leat, P. & Renwick, A. (2012). The relationship between output and unemployment in Scotland: A regional analysis. Land Economy Working Paper Series, Number: 65, EH9 3J
Sanusi, A. R. (2012). Macroeconomic policy, output and unemployment dynamics in Nigeria: Is there evidence of jobless growth? Paper presented at the 53rd Annual Conference of the Nigerian Economics Society on Youth Employment and Poverty Reduction in Nigeria held at NICON Luxury Hotel, Abuja between 27th and 30th August
Silvapulle, P., Moosa, I. A., Silvapulle, M. J. (2004). Asymmetry in Okun's Law, Canadian Journal of Economics, 37(2), 353-374.
Sögner, L. and Stiassny, A. (2002). An analysis on the structural stability of Okun’s law: A cross-country study, Applied Economics, 14, 1775-87.
Soylu, Ö. B.,Çakmak, I., & Okur, F.(2018).Economic growth and unemployment issue: Panel data analysis in Eastern European Countries. Journal of International Studies, 11(1), 93-107. doi:10.14254/2071-8330.2018/11-1/7
Stephan, G. (2012). The relationship between output and unemployment in France and United Kingdom. University of Rennes, April (Preliminary draft)
World Development Indicators - World Bank Data Catalog (2018). Unemployment. Retrieved from https: datacatalog.worldbank.org › dataset › world-development-indicators
Published
2020-04-09
How to Cite
Onakoya, A. B., & Victor, S. A. (2020). Economic Growth and Unemployment Nexus: Okun’s Two-Version Case for Nigeria, South Africa and United States of America. Journal of Economics and Behavioral Studies, 12(1(J), 55-65. https://doi.org/10.22610/jebs.v12i1(J).3006
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Copyright (c) 2020 Adegbemi Babatunde Onakoya, SEYINGBO, Adedotun Victor
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