Okun's law is an empirically observed relationship between a country's unemployment rate and losses in its economic output, named for the economist Arthur Melvin Okun, who introduced it in 1962. One common formulation, the gap version, holds that for every one percentage point increase in the unemployment rate, a country's gross domestic product falls roughly two percent below its potential level; a second, the difference version, instead relates quarter to quarter changes in unemployment to quarter to quarter changes in real GDP growth. The relationship is not universally accepted among economists, and its stability and practical usefulness across different times and countries has been disputed even as many still treat it as a useful rule of thumb. This description is adapted from Wikipedia contributors under CC BY-SA 4.0; changes were made. https://creativecommons.org/licenses/by-sa/4.0/
Facts
FieldMacroeconomics (labor markets and output) 1 SignificanceThe gap version states that for every 1 percent increase in the unemployment rate, a country's GDP falls roughly 2 percent below potential GDP, though the law's stability and usefulness have been disputed. 1 Classification
Concept FormEmpirical Measure or Indicator 1 Connections
Associated With School
Arthur Okun, who formulated the law, worked within the Keynesian tradition relating output gaps to unemployment.
Source Wikipedia
Additional Source Okun's law (Wikipedia)
Attributed To
Source History of Economic Thought Website: Arthur Okun profile
Sources
1. Okun's law (Wikipedia)
Lead section
The stability and usefulness of the law has been disputed.
lead paragraph, sentence beginning: In economics, Okun's law is an empirically observed relation
In economics, Okun's law is an empirically observed relationship between unemployment and losses in a country's production.
- Associated With School: Keynesian Economics
In Group: Output, Cycles and Fiscal Policy Concepts, Lead
In economics, Okun's law is an empirically observed relationship between unemployment and losses in a country's production.
View the SourceHistory of Economic Thought Website: Arthur Okun profile
History of Economic Thought WebsiteAttributed To: Arthur Okun, Profile pageQuote, Attributed To: Arthur Okun, Profile page
Okun is best known for discovering "Okun's Law" in 1962, an empirical relationship between GDP and unemployment in post-war data, specifically that every 1% decrease in unemployment increases GDP by 3%.
Reader Challenges (0)
No disputes yet. Spotted an error or a better source? Open the first one.
Sign in to dispute this or suggest a correction.
View At A Past Year
Choose a year to see this entry's facts and connections as the atlas records them at that moment: what it held then, what it held instead, and what it had not yet adopted. Choose Present for the current record.