Okun's Law, Development, and Demographics: Differences in the Cyclical Sensitivities of Unemployment Across Economy and Worker Groups

22 Pages Posted: 4 Feb 2022

See all articles by Zidong An

Zidong An

Renmin University of China

John C. Bluedorn

International Monetary Fund (IMF) - Research Department

Gabriele Ciminelli

Asia School of Business in collaboration with MIT Sloan; Organization for Economic Co-Operation and Development (OECD) - Policy Studies Branch

Date Written: November 2021

Abstract

The negative and stable relationship between an economy’s aggregate demand conditions and overall unemployment is well-documented. We show that there is a large degree of heterogeneity in the cyclical sensitivities of unemployment across worker and economy groups. First, unemployment is more than twice as sensitive to aggregate demand in advanced as in emerging market and developing economies. Second, youth’s unemployment is twice as sensitive as that of adults’. Third, women’s unemployment is significantly less sensitive to demand than men’s in advanced economies. These findings point to the highly unequal impacts of the business cycle across worker and economy groups.

Keywords: unemployment, business cycles, Okun’s Law, demographics, economy group, unemployment across economy, women's unemployment, cyclical sensitivities of unemployment, unemployment gap, Unemployment, Labor force participation, Employment, Cyclical unemployment, Women

JEL Classification: E24, E26, J20, J21, J40, J64, J82, J16

Suggested Citation

An, Zidong and Bluedorn, John C. and Ciminelli, Gabriele, Okun's Law, Development, and Demographics: Differences in the Cyclical Sensitivities of Unemployment Across Economy and Worker Groups (November 2021). IMF Working Paper No. 2021/270, Available at SSRN: https://ssrn.com/abstract=4026500

Zidong An (Contact Author)

Renmin University of China ( email )

59 Zhong Guan Cun Avenue
Hai Dian District
Beijing, 100872
China
13671168561 (Phone)
100872 (Fax)

John C. Bluedorn

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Gabriele Ciminelli

Asia School of Business in collaboration with MIT Sloan ( email )

Organization for Economic Co-Operation and Development (OECD) - Policy Studies Branch ( email )

Paris
France

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