Abstract
Empirical Analysis of the Elasticity of Employment to Output Gap in the Republic of Croatia
Highlights
The number of employees and labour productivity are among the most important factors in generating GDP in the economy
The results of the analysis indicate a statistically significant impact of the cyclical component of GDP on cyclical employment in the Croatian economy and the authors suggest that this approach should be used as a complementary to Okun’s law
In this article the impact of cyclical activity of GDP on cyclical employment in the Republic of Croatia is analysed in the period from 2000 to 2020, using the vector error correction model (VEC)
Summary
The number of employees and labour productivity are among the most important factors in generating GDP in the economy. The optimum use of productive resources is established at so-called full employment [2], which represents the level of employment corresponding to the current intensity of economic activities. Such a definition of full employment does not mean that there are no unemployed. The complete disappearance of the unemployed would upset the market balance and cause inflationary pressures This occurs when current GDP is higher than potential, which is a sign that economic activity is so strong that demand outweighs supply and puts pressure on the general price level to increase [3]
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