Files
Abstract
The relationship between unemployment and growth (i.e., the so-called Okun’s Law)
has long standing in macroeconomics and regional economics. In this paper we
estimate such a relationship for Scotland and at the Nomenclature of Territorial Units
for Statistics (NUTS) level 3 regions using a panel dataset. The main motivations
behind this interest are twofold: first, to test whether such a relationship exists in
Scotland and how different these estimates are from those produced for the UK.
Second, whether there exist regional differences in the estimates. The latter is
particularly important in the context of the current budgetary cuts, which may affect
both GDP growth and unemployment in different ways rural and urban areas.
Results indicate that the Okun’s coefficient for Scotland is slightly higher than the one
computed for the UK (1.7 Scotland versus 1.39 and 1.45 for the UK), and although an
Okun relationship seemed to be valid for most of the regions, there were no statistical
differences between rural and urban areas. However, as regards the effect of
economic growth on unemployment, the results indicate a different and stronger effect
in urban areas than in rural areas.