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The relationship between economic growth and employment

Author

Listed:
  • K. Burggraeve

    (National Bank of Belgium)

  • G. de Walque

    (National Bank of Belgium)

  • H. Zimmer

    (National Bank of Belgium)

Abstract

The article finds that productivity in Belgium has tended to slow down over the past three decades. After controlling for that fundamental tendency, the relationship between persons in employment and economic activity appears generally stable over time throughout the business cycle and is generally unaffected by recessions. In Belgium in particular, in terms of deviation from their respective trends, a 1 % rise in GDP brings a 0.5 % increase in employment. That figure is in line with the European average. The downward trend in productivity is accompanied by a shift to the tertiary sector of the economy. That is also one of the factors behind the decline in average working time. Although the relationship between employment and GDP is very stable throughout the business cycle, the recent financial crisis differs from previous recessions in a general tendency to protect jobs at first, in all twelve economies studied in the article. However, that soon came to an end and the situation returned to normal ; if employment is struggling to pick up, that is essentially because of the weakness of the economic recovery. Finally, it is very clear that firms initially respond to fluctuations in the economy by adjusting the hours worked. In Belgium, the elasticity of those hours to economic activity is about 50 % greater than the elasticity of the number of persons employed in all sectors sensitive to the business cycle.

Suggested Citation

  • K. Burggraeve & G. de Walque & H. Zimmer, 2015. "The relationship between economic growth and employment," Economic Review, National Bank of Belgium, issue i, pages 32-52, June.
    • Handle: RePEc:nbb:ecrart:y:2015:m:june:i:i:p:32-52
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    References listed on IDEAS

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    1. Davide Furceri & Ernesto Crivelli & Mr. Joël Toujas-Bernate, 2012. "Can Policies Affect Employment Intensity of Growth? A Cross-Country Analysis," IMF Working Papers 2012/218, International Monetary Fund.
    2. Ball, Laurence & Jalles, João Tovar & Loungani, Prakash, 2015. "Do forecasters believe in Okun’s Law? An assessment of unemployment and output forecasts," International Journal of Forecasting, Elsevier, vol. 31(1), pages 176-184.
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    Citations

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    Cited by:

    1. Hawkins, Raymond J. & Li, Yichu, 2022. "Okun loops and anelastic relaxation in the EU15," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 593(C).
    2. Fernando Sánchez López, 2024. "Tourism and Economic Misery: Theory and Empirical Evidence from Mexico," Economies, MDPI, vol. 12(4), pages 1-20, April.
    3. Mindaugas Butkus & Laura Dargenytė-Kacilevičienė & Kristina Matuzevičiūtė & Dovilė Ruplienė & Janina Šeputienė, 2024. "When and for Whom Does Growth Becomes Jobless?," Economies, MDPI, vol. 12(1), pages 1-20, January.
    4. Mindaugas Butkus & Laura Dargenyte-Kacilevièiene & Kristina Matuzevièiute & Janina Šeputiene & Dovile Rupliene, 2023. "Age- and Gender-specific Output-employment Relationship across Economic Sectors," Journal of Economics / Ekonomicky casopis, Institute of Economic Research, Slovak Academy of Sciences, vol. 71(1), pages 3-22, January.
    5. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    6. Richard Gardiner & Petr Hajek, 2020. "Interactions among energy consumption, CO2, and economic development in European Union countries," Sustainable Development, John Wiley & Sons, Ltd., vol. 28(4), pages 723-740, July.
    7. Andrea Caggese & Ozan Guler & Mike Mariathasan & Klaas Mulier, 2022. "Firing costs and productivity: Evidence from a natural experiment," Economics Working Papers 1853, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Amy Dict-Weng Kwan & Tuck-Cheong Tang, 2020. "We Bring You Capital and Job – Foreign Investment and Employment in Malaysia," Capital Markets Review, Malaysian Finance Association, vol. 28(1), pages 49-63.
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    More about this item

    Keywords

    employment; hours worked; labour productivity; business cycle; labour market; Okun’s law;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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