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Changes in cyclical patterns of the USA labor market: from the perspective of nonlinear Okun’s law

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  • Jong-seok Oh

Abstract

The validity of Okun’s law has been debated because of the increase in cyclicality in aggregate hours after 1985. To investigate this, I measure Okun’s coefficients in three phases of the business cycle – recession, early, and late expansions. I found that an increased coefficient for aggregate hours is due to the increased responsiveness of the employment rate during late expansions and to the increased responsiveness of hours per employee during early expansions. These findings question the flexible labor market hypothesis focusing on firms’ firing behaviors during recessions. Rather, working hours’ flexibility represents a more prominent feature of the post-1985 USA labor market.

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  • Jong-seok Oh, 2018. "Changes in cyclical patterns of the USA labor market: from the perspective of nonlinear Okun’s law," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(2), pages 237-258, March.
    • Handle: RePEc:taf:irapec:v:32:y:2018:i:2:p:237-258
    DOI: 10.1080/02692171.2017.1339023
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    References listed on IDEAS

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    1. Thor Hultgren, 1965. "Cost, Prices, and Profits: Their Cyclical Relations," NBER Books, National Bureau of Economic Research, Inc, number hult65-1.
    2. Reich, Michael, 2012. "The Rising Strength of Management, High Unemployment and Slow Growth: Revisiting Okun’s Law," Institute for Research on Labor and Employment, Working Paper Series qt8sc8s1z1, Institute of Industrial Relations, UC Berkeley.
    3. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1.
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    Cited by:

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    2. 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.
    3. Mindaugas BUTKUS & Laura DARGENYTE-KACILEVICIENE & Kristina MATUZEVICIUTE & Dovile RUPLIENE & Janina SEPUTIENE, 2024. "Are there more than three regimes in the output-unemployment relationship? A panel quantile regression estimates of Okun's gap model in EU countries," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 15, pages 201-218, June.
    4. Stefan Ederer & Stefan Schiman, 2018. "Produktion und Produktivität. Kaldor-Verdoorn-Effekte in der Sachgütererzeugung in Österreich und der EU," WIFO Monatsberichte (monthly reports), WIFO, vol. 91(1), pages 53-61, January.

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