Why does Okun’s law change? Essay in econometric history

Abstract

This article aims to demonstrate the existence of significant shifts in Okun’s law parameters, indicating their non-constant nature over time, and to dissect potential origins of these fluctuations. To achieve this end, extensive quarterly unemployment series are, for the first time, compiled for Spain and Italy. Through a cross-country comparison, the investigation reveals that these parameters exhibit transformations, albeit in divergent manners. The decline in productivity growth and the change in the labor structure have played an important role in these changes. The study introduces novel insights, accentuating complexity of coefficient dynamics, from a historical perspective.