The robustness of Okun's law in Spain, 1980–2004: Regional evidence

Abstract

The purpose of this paper is to analyse Okun's law for the Spanish regions over the period 1980–2004. Based on its “gap” specification, the results show that an inverse relationship between unemployment and output holds for most of the regions and for the whole country. However, the quantitative values of Okun's coefficients are quite different, a result that is partially explained by regional disparities in productivity growth. These differences imply that, when it comes to policy issues, conventional aggregate demand/supply management policies should be combined with region-specific policies.