Do gender and age impact the time‐varying Okun's law? Evidence from South Korea

• Published date: 01 December 2019
• Author: Myeong Jun Kim,Sung Y. Park
• DOI: http://doi.org/10.1111/1468-0106.12288
• Date: 01 December 2019

ORIGINAL MANUSCRIPT

Do gender and age impact the time-varying Okun’s

law? Evidence from South Korea

Myeong Jun Kim

1

| Sung Y. Park

2

1

South China University of Technology,

Guangzhou, China

2

Chung-Ang University, Seoul, Korea

Correspondence

Sung Y Park, School of Economics, Chung-Ang

University, 84 Heukseok-Ro, Dongjak-Gu, Seoul,

Korea.

Email: sungpark@cau.ac.kr

Abstract

This study investigates the time-varying Okun’s law for

different age and gender cohorts in South Korea over the

1980–2014 period. We found that the absolute value of

the estimated Okun coefficients for all age cohorts and

both genders become larger in a recession than in

an expansion. We also found that the youth cohort

(15–24 years old) for both genders is more sensitive to

a negative economic impact than are older cohorts.

These differences imply that when policymakers try to

find a way of reducing the unemployment rate, they

should consider differences in behaviour among these

groups. Furthermore, the policies should be combined

with age-specific policies.

1|INTRODUCTION

Numerous studies have analysed at the country-level the relationship between changes in unemploy-

ment and output, in what is referred to as “Okun’s law”. Okun (1962) discovered the negative rela-

tionship between the unemployment rate and output. Since Okun’s finding, many studies have

examined and confirmed this relationship (Evans, 1989; Kaufman, 1988; Lee, 2000; Silvapulle,

Moosa, & Silvapulle, 2004; Wang & Huang, 2017; Weber, 1995). However, the relationship may not

be constant over time and, moreover, may differ across age and gender cohorts within a country. This

study explores the time-varying relationship between the unemployment rate and real GDP across

age and gender cohorts in South Korea.

From the mid-2000s, considerable attention has been paid to the issue of youth unemployment,

as one of the more serious problems that South Korea faces. The average unemployment rate among

youth (15–24 years old) has increased substantially, from 8.8% in 2007 to 10.5% in 2015. Somestudies

have examined how age impacts Okun’s law for OECD and eurozone countries. Hutengs and Stadt-

mann (2013, 2014) focused on the relationship between real output and the unemployment rate, espe-

cially for the age cohorts of 11 eurozone countries and selected eastern European countries; they found

that the youth cohort is more vulnerable to the business cycle compared to older cohorts. This means

Received: 18 April 2018 Revised: 20 August 2018 Accepted: 1 October 2018

DOI: 10.1111/1468-0106.12288

672 © 2018 John Wiley & Sons Australia, Ltd Pac Econ Rev. 2019;24:672–685.wileyonlinelibrary.com/journal/paer