DOCSLIB.ORG

Measuring Welfare an Alternative to GDP

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Measuring Welfare an Alternative to GDP STOCKHOLM SCHOOL OF ECONOMICS Department of Economics 5350 Thesis in Economics Supervisor: Kelly Ragan Measuring Welfare An Alternative to GDP Birgit Altmann* May 15, 2013 Abstract: GDP per capita is generally used to compare welfare across countries and time. However, it faces significant limitations in serving as an appropriate welfare measure. Amongst others, GDP does not account for the distribution of wealth and omits important well-being determinants such as quantity and quality of life. In previous literature a consumption-equivalent model has been developed as an alternative welfare measure containing the factors life expectancy, consumption, leisure and inequality. The model is enhanced in this paper by incorporating the additional factors health and corruption. With this approach, living standards are compared across a broad set of countries both in levels and across time. The results show that for a significant proportion of countries this alternative welfare measurement differs substantially from the traditional GDP evaluation. For instance, life expectancy raises well-being in certain regions such as Western Europe, but considerably reduces welfare in Eastern Europe and Sub-Saharan Africa. In Latin America, inequality within countries is a crucial factor, whereas corruption is most detrimental in Africa. Welfare growth tends to be higher than income growth in the sample due to improvements in longevity, corruption and leisure time. Keywords: Welfare, well-being, living standards, alternative welfare measurement, GDP, comparative country studies JEL classification: D60, D63, I31, 057 Date of presentation: May 24, 2013 Examiner: Juanna Joensen Discussant: Carl Johan von Seth *[email protected] Acknowledgements I would like to thank my supervisor Kelly Ragan for her valuable advice and support throughout the entire course of writing this thesis. In addition, I want to thank Örjan Sjöberg for numerous enriching discussions on methodology and content, as well as David Domeij for helpful comments on the model. This thesis was written in cooperation with the Swedish Ministry of Finance, where I would like to thank especially Thomas Eisensee for his valuable input during the early stage of the project. Finally, I would like to express my gratitude to Irene Kögl, Meredith Smith and Peter Liebrich for reviewing my thesis and lingual corrections. All remaining errors are my own. ii Contents Contents List of Figures ................................................................................................................................. iv List of Tables ................................................................................................................................... iv List of Abbreviations ........................................................................................................................ v 1 Introduction ....................................................................................................................................... 1 2 Literature Review ............................................................................................................................... 4 2.1 Which Factors Determine Welfare? ......................................................................................... 4 2.2 Alternative Approaches to Measure Well-Being ...................................................................... 8 2.3 Statement of Purpose ............................................................................................................ 12 3 The Consumption-Equivalent Model ............................................................................................... 13 3.1 The Underlying Utility Function.............................................................................................. 13 3.2 Calculating Welfare Across Countries .................................................................................... 15 3.3 Calculating Welfare Across Time ............................................................................................ 18 3.4 Calibration .............................................................................................................................. 19 4 Data Sources ..................................................................................................................................... 21 5 Results and Discussion ..................................................................................................................... 25 5.1 Welfare Comparison Across Countries ................................................................................... 25 5.2 Welfare Comparison Across Time .......................................................................................... 32 5.3 Robustness ............................................................................................................................. 38 5.4 Limitations .............................................................................................................................. 43 6 Conclusion ........................................................................................................................................ 46 References ............................................................................................................................................ 48 Appendix A: Summary Statistics for Underlying Data ........................................................................... 56 Appendix B: Graphical Illustration of Underlying Data ......................................................................... 57 Appendix C: Regional Classification of Sample Countries ..................................................................... 59 Appendix D: Graphical Illustration of Results ....................................................................................... 60 Appendix E: Results for All Countries .................................................................................................... 64 iii Contents List of Figures Figure 1: Healthy Life Expectancy ......................................................................................................... 21 Figure 2: Welfare and Income in 2007 .................................................................................................. 26 Figure 3: Ratio of Welfare to Income, 2007 .......................................................................................... 27 Figure 4: Welfare Determinants in Major Regions, 2007 ..................................................................... 27 Figure 5: Average Annual Welfare and Income Growth Rates, 2000-2007 .......................................... 33 Figure 6: Difference between Average Annual Welfare and Income Growth, 2000-2007 ................... 34 Figure 7: Determinants for Welfare Growth in Major Regions, 2000-2007 ......................................... 35 Figure 8: Bribe Tax vs. CPI, 2005 and 2008 ........................................................................................... 42 Figure 9: Consumption Share ................................................................................................................ 57 Figure 10: Leisure Rate .......................................................................................................................... 57 Figure 11: Gini Coefficient..................................................................................................................... 58 Figure 12: Corruption Perception Index ............................................................................................... 58 Figure 13: Detailed Welfare Determinants in Major Regions, 2007 ..................................................... 60 Figure 14: Welfare Impacts of the Six Factors on Major Regions, 2007 ............................................... 61 Figure 15: Detailed Welfare Growth Determinants in Major Regions, 2000-2007 .............................. 62 Figure 16: Impact of Various Factors on Welfare Growth, 2000-2007 ................................................. 63 List of Tables Table 1: Summary Statistics, Welfare 2007 .......................................................................................... 25 Table 2: Results for Selected Regions, Welfare 2007 ........................................................................... 28 Table 3: Results for Selected Countries, Welfare 2007 ........................................................................ 30 Table 4: Summary Statistics, Average Annual Welfare Growth 2000-2007 ......................................... 33 Table 5: Results for Selected Regions, Annual Average Welfare Growth 2000-2007 .......................... 35 Table 6: Results for Selected Countries, Average Annual Welfare Growth 2000-2007........................ 36 Table 7: Summary Statistics, Robustness Check ................................................................................... 38 Table 8: Results for Sweden and Ecuador, Robustness Check Welfare 2007 ....................................... 39 Table 9: Results for Sweden and Ecuador, Robustness Check Welfare Growth 2000-2007 ................ 40 Table 10: Summary Statistics for the Levels Sample, Data for 2007 .................................................... 56 Table 11: Summary Statistics for the Growth Sample, Data for 2000 .................................................. 56 Table 12: Summary Statistics for the Growth Sample, Data for 2007 .................................................
Load more

Recommended publications
  • Journal of Economics and Behavioral Studies (ISSN: 2220-6140) Vol. 12, No. 1, Pp. 55-65, February 2020 Economic Growth and Unemp
    Journal of Economics and Behavioral Studies (ISSN: 2220-6140) Vol. 12, No. 1, pp. 55-65, February 2020 Economic Growth and Unemployment Nexus: Okun’s Two-Version Case for Nigeria, South Africa and United States of America ONAKOYA, Adegbemi Babatunde1, SEYINGBO, Adedotun Victor2 1Department of Economics, Babcock University Ilishan-Remo, Nigeria 2Department of Economics, Tai Solarin University of Education, Ijagun, Nigeria [email protected], [email protected] Abstract: Okun’s law in its original form was predicated on the experience in the United States of America. Some methodological refinements have been added based on studies conducted in other climes with varied results. This research investigated the applicability of this law in Nigeria, South Africa and the United States of America. The study conducted a comparative analysis of three of the versions of the law. The research employed Ordinary Least Squares method having validated it’s appropriateness with Dickey-Fuller and Philips-Perron tests. The result also showed that the dynamic version of the law was applicable in the three nations while the difference version was applicable only in Nigeria. This study also found that the dynamic version was superior to the difference version. Deployment of employment creative employment schemes, labour market reform and economic restructuring are recommended in the Nigerian case. The policy makers on South Africa and USA are enjoined to pursue both labour and growth-inducing policies. Keywords: Okun's Law, GDP growth, Unemployment rate, Difference version, Dynamic version. 1. Introduction The postulation of Arthur Melvin Okun (1939-1980) is part of the supply-side economics school of macroeconomic thought which contends that economic growth can be effectively engendered by lowering of production barriers.
    [Show full text]
  • Decomposing the Misery Index: a Dynamic Approach
    Cohen, Ivan K., Ferretti, Fabrizio, McIntosh, Bryan and Elliott, Caroline (2014) Decomposing the misery index: A dynamic approach. Cogent Economics & Finance, 2 (1). Downloaded from: http://ray.yorksj.ac.uk/id/eprint/4335/ The version presented here may differ from the published version or version of record. If you intend to cite from the work you are advised to consult the publisher's version: http://dx.doi.org/10.1080/23322039.2014.991089 Research at York St John (RaY) is an institutional repository. It supports the principles of open access by making the research outputs of the University available in digital form. Copyright of the items stored in RaY reside with the authors and/or other copyright owners. Users may access full text items free of charge, and may download a copy for private study or non-commercial research. For further reuse terms, see licence terms governing individual outputs. Institutional Repository Policy Statement RaY Research at the University of York St John For more information please contact RaY at [email protected] Cohen et al., Cogent Economics & Finance (2014), 2: 991089 http://dx.doi.org/10.1080/23322039.2014.991089 GENERAL & APPLIED ECONOMICS | LETTER Decomposing the misery index: A dynamic approach Ivan K. Cohen1, Fabrizio Ferretti2,3* and Bryan McIntosh4 Received: 17 October 2014 Abstract: The misery index (the unweighted sum of unemployment and inflation Accepted: 19 November 2014 rates) was probably the first attempt to develop a single statistic to measure the level Published: 13 December 2014 of a population’s economic malaise. In this letter, we develop a dynamic approach to *Corresponding author, Fabrizio Ferretti, Department of Communication and decompose the misery index using two basic relations of modern macroeconomics: Economics, University of Modena and the expectations-augmented Phillips curve and Okun’s law.
    [Show full text]
  • 2. Trade, Jobs and Politics
    GREA1918 • FOREIGN POLICYT ASSOCIATION DECISIONS EDITION 2017 2. Trade, jobs and politics Acronyms and abbreviations Graham-Schumer bill: A 2005–06 bill, proposed by BLS—Bureau of Labor Statistics Senator Charles Schumer (D-NY) and Senator Lindsey EPI—Economic Policy Institute O. Graham (R-SC). It called for the imposition of tariffs GDP—Gross domestic product on Chinese products as a response to Chinese currency IMF—International Monetary Fund manipulation. The bill was abandoned before it could NAFTA—North American Free Trade Agreement be put to a vote, following pressure from then-President PNTR—Permanent Normal Trade Relations George W. Bush. PPP—Purchasing power parity TAA—Trade Adjustment Assistance Program Gross Domestic Product: The monetary value of all TPP—Trans-Pacific Partnership goods and services produced in a country in a certain WTO—World Trade Organization period of time. International Monetary Fund (IMF): An institution in Glossary the United Nations system. The IMF was established in Balance of trade: The difference between a country’s 1945 in the wake of the Great Depression and the Sec- imports and its exports. ond World War, and tasked with ensuring the stability of the international monetary system. Today, this includes Brexit: A term for the UK’s referendum on EU mem- regulating the system of exchange rates and internation- bership, held on June 23, 2016. The British public voted al payments, as well as relevant macroeconomic and 52% to 48% to leave the union. The UK will remain in financial sector issues. the union until it invokes Article 50 of the EU’s Lisbon Treaty, after which point the terms of Britain’s exit must Joseph Stiglitz: The recipient of the Nobel Prize in be agreed upon within a period of two years.
    [Show full text]
  • Output and Unemployment Dynamics∗
    Output and Unemployment Dynamics Mary C. Daly John G. Fernald Òscar Jordà Fernanda Nechio Federal Reserve Bank of San Francisco March 30, 2015 Abstract The strong and systematic comovement of unemployment and output is a defining feature of business cycles. We derive and implement a new growth-accounting decomposition of this "Okun relationship" that quantifies key margins of adjustment used by households and firms. The rela- tionship has been surprisingly stable over time and over the business cycle– despite considerable changes in underlying economic relationships. When we condition on different shocks, we can explain the patterns we find. Specifically, though the time path of output and unemployment varies considerably depending on the shock, the eventual implications for unconditional comove- ment turns out to be fairly similar. Regardless of the shock, hours worked typically falls about two percent when the unemployment rate rises by a percentage point– more than typically allowed by the structure of recent macro models. A technology shock leads to a larger decline in hours than a demand shock, but the output-unemployment relationship is nevertheless stable because technology shocks induce positive and offsetting comovement of labor productivity and unemploy- ment. Finally, the shift from procyclical to countercyclical labor productivity reflects two factors during the Great Moderation period: first, technology shocks appear relatively more important; second, factor utilization is less closely associated with unemployment fluctuations,consistent with increasing flexibility of the economy. JEL classification codes: E23, E24, E32, J20 Keywords: growth accounting, output and employment fluctuations, cyclical productivity, Okun’sLaw We thank Valerie Ramey and participants at the SED 2013, 2013 NBER Summer Institute, the 2014 European Economic Association meetings, and several academic institutions for helpful comments on this paper.
    [Show full text]
  • Equality and Efficiency: the Big Tradeoff Is a Very Personal Work from One of the Most Important Macroeconomists of the Last Efficiency and Equality Hundred Years
    Originally published in 1975, Equality and Efficiency: The Big Tradeoff is a very personal work from one of the most important macroeconomists of the last equality and efficiency hundred years. In classrooms Arthur M. Okun may be best remembered for Okun’s Law, but equality his lasting legacy is the respect and admiration he earned from economists, practitioners, and policymakers. Equality and Efficiency is the perfect embodiment of that legacy, valued both by professional economists and readers with a keen interest in social policy. Okun presents an engaging dual theme: the market needs efficiency a place, and the market needs to be kept in its place. As he puts it, institutions in a capitalist democracy prod us to get ahead of our neighbors economically after telling us to stay in line socially. This double standard professes and pursues an egalitarian political and social system while simultaneously generating gaping The Big Tradeoff disparities in economic well-being. Today, Okun’s dual theme seems prescient as we grapple with the hot-button topic of income inequality. As Lawrence H. Summers writes: On what one might think of as questions of “economic philosophy,” I doubt that Okun has been improved on in the subsequent interval. His discussion of how societies rely on rights as well as markets should be required reading for all young economists who are enamored with market solutions to all problems. with a new foreword by lawrence h. summers This new edition includes “Further Thoughts on Equality and Efficiency,” a paper published by the author two years after the book’s publication.
    [Show full text]
  • It's All in the Mix: How Monetary and Fiscal Policies Can Work Or Fail
    GENEVA REPORTS ON THE WORLD ECONOMY 23 Elga Bartsch, Agnès Bénassy-Quéré, Giancarlo Corsetti and Xavier Debrun IT’S ALL IN THE MIX HOW MONETARY AND FISCAL POLICIES CAN WORK OR FAIL TOGETHER ICMB INTERNATIONAL CENTER FOR MONETARY AND BANKING STUDIES CIMB CENTRE INTERNATIONAL D’ETUDES MONETAIRES ET BANCAIRES IT’S ALL IN THE MIX HOW MONETARY AND FISCAL POLICIES CAN WORK OR FAIL TOGETHER Geneva Reports on the World Economy 23 INTERNATIONAL CENTER FOR MONETARY AND BANKING STUDIES (ICMB) International Center for Monetary and Banking Studies 2, Chemin Eugène-Rigot 1202 Geneva Switzerland Tel: (41 22) 734 9548 Fax: (41 22) 733 3853 Web: www.icmb.ch © 2020 International Center for Monetary and Banking Studies CENTRE FOR ECONOMIC POLICY RESEARCH Centre for Economic Policy Research 33 Great Sutton Street London EC1V 0DX UK Tel: +44 (20) 7183 8801 Fax: +44 (20) 7183 8820 Email: [email protected] Web: www.cepr.org ISBN: 978-1-912179-39-8 IT’S ALL IN THE MIX HOW MONETARY AND FISCAL POLICIES CAN WORK OR FAIL TOGETHER Geneva Reports on the World Economy 23 Elga Bartsch BlackRock Investment Institute Agnès Bénassy-Quéré University Paris 1 Panthéon-Sorbonne, Paris School of Economics and CEPR Giancarlo Corsetti University of Cambridge and CEPR Xavier Debrun National Bank of Belgium and European Fiscal Board ICMB INTERNATIONAL CENTER FOR MONETARY AND BANKING STUDIES CIMB CENTRE INTERNATIONAL D’ETUDES MONETAIRES ET BANCAIRES THE INTERNATIONAL CENTER FOR MONETARY AND BANKING STUDIES (ICMB) The International Center for Monetary and Banking Studies (ICMB) was created in 1973 as an independent, non-profit foundation.
    [Show full text]
  • Okun's Law: Can It Still Be a Best Rule of Thumb? (Atime-Series Analysis)
    OKUN’S LAW: CAN IT STILL BE A BEST RULE OF THUMB? (A TIME-SERIES ANALYSIS) A Thesis Presented to the Faculty of California State Polytechnic University, Pomona In Partial Fulfillment Of the Requirements for the Degree Master of Science In Economics By Abdullah Alkraidees & Anees Ayaz 2014 SIGNATURE PAGE THESIS: OKUN’S LAW: CAN IT STILL BE A BEST RULE OF THUMB? (A TIME SERIES ANALYSIS) AUTHOR: Abdullah Alkraidees & Anees Ayaz DATE SUBMITTED: Spring 2014 Economics Department Dr. Carsten Lange _________________________________________ Thesis Committee Chair Economics Dr. Bruce Brown _________________________________________ Economics Dr. Craig Kerr _________________________________________ Economics ABSTRACT Since 1962, policy makers and economists consider Okun’s law as a pillar of mainstream economics. Keeping this point into consideration, the main goal of our research project is to find out a relationship between the unemployment rate and the GDP growth rate as proposed by Okun (1960). The paper also focuses on the short-run and long-run relationship between these two variables. For this purpose a time series data from 2001 to 2013 is used, and is divided into two time periods, on quarterly basis, 2001:Q1-2007:Q4 and 2008:Q1-2013:Q4. Time-series econometric techniques are applied on each period to find an association between unemployment rate and GDP growth rate including Augmented Dickey-Fuller (ADF) test for stationary analysis, Engle-Granger test of co- integration and Johansen test of co-integration for co-integration analysis, vector auto- regressive model (VAR), and vector auto-regressive model (VECM) for finding inter- dependencies between variables, and finally estimating a difference version of Okun’s law regression equation.
    [Show full text]
  • NBER WORKING PAPER SERIES MONETARY POLICY MISTAKES and the EVOLUTION of INFLATION EXPECTATIONS Athanasios Orphanides John Willia
    NBER WORKING PAPER SERIES MONETARY POLICY MISTAKES AND THE EVOLUTION OF INFLATION EXPECTATIONS Athanasios Orphanides John Williams Working Paper 17080 http://www.nber.org/papers/w17080 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 May 2011 We thank Nick Bloom, Bob Hall, Seppo Honkapohja, Andy Levin, John Taylor, Bharat Trehan, and participants at the NBER Conference on the "Great Inflation" and other presentations for helpful comments and suggestions. We also thank Justin Weidner for excellent research assistance. The opinions expressed are those of the authors and do not necessarily reflect the views of the Central Bank of Cyprus, the Governing Council of the European Central Bank, the Federal Reserve Bank of San Francisco, the Board of Governors of the Federal Reserve System, or the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer- reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications. © 2011 by Athanasios Orphanides and John Williams. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Monetary Policy Mistakes and the Evolution of Inflation Expectations Athanasios Orphanides and John Williams NBER Working Paper No. 17080 May 2011 JEL No. E52 ABSTRACT What monetary policy framework, if adopted by the Federal Reserve, would have avoided the Great Inflation of the 1960s and 1970s? We use counterfactual simulations of an estimated model of the U.S. economy to evaluate alternative monetary policy strategies.
    [Show full text]
  • Spring 2018 Economics
    SPRING 2018 ECONOMICS Dream Hoarders How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It Richard V. Reeves “Reading Richard Reeves on social mobility is like going for a good walk: he is bracing, head clearing, and ultimately inspiring. With rigor and wit, his new book shows how millions of successful, hardworking Americans, often with the best of intentions, have helped build a society where birth matters more than brilliance. Impassioned, data-driven, and focused on practical solutions, Dream Hoarders is a fine cure for an age of stale, cynical politics.” —David Rennie, The Economist It is now conventional wisdom to focus on the wealth of the top 1 percent— especially the top 0.01 percent—and how the ultra-rich are concentrating income and pros- perity while incomes for most other Americans are stagnant. But the most important, consequential, and widening gap in American society is between the upper middle class and everyone else. As Reeves shows, the growing separation between the upper middle class and ev- eryone else can be seen in family structure, neighborhoods, attitudes, and lifestyle. Those at the top of the income ladder are becoming more effective at passing on their status to their children, reducing overall social mobility. The result is not just June 2017, 6 x 9, 240 pp. an economic divide but a fracturing of American society along class lines. Upper- cloth, 9780815729129, $24.00 middle-class children become upper-middle-class adults. ebook, 9780815729136, $23.99 These trends matter because the separation and perpetuation of the upper middle class corrode prospects for more progressive approaches to policy.
    [Show full text]
  • Volume 8, Issue 4
    Modern Journal of Language Teaching Methods ISSN: 2251-6204 Downloaded from mjltm.org at 11:00 +0330 on Tuesday October 5th 2021 [ DOI: 10.26655/mjltm.2018.4.1 ] Vol. 8, Issue 4, April 2018 Page 1 Modern Journal of Language Teaching Methods ISSN: 2251-6204 Modern Journal of Language Teaching Methods (MJLTM) ISSN: 2251 - 6204 www.mjltm.com [email protected] Editorial Board: 1. Hamed Ghaemi,Assistant Professor in TEFL,Islamic Azad University (IAU),Iran 2. Domingo Docampo Amoedo,Full Professor,Department: Signal Theory and Communications, Vigo University,spain 3. Barbara Sicherl Kafol,Full Professor of Music Education University of Ljubljana,slovenia 4. Agüero-Calvo Evelyn,Professor of Mathematics,Technological Institute of Costa Rica 5. Tito Anamuro John Albert,Assistant professor Universidad del Norte,Colombia 6. Dlayedwa Ntombizodwa,Lecturer,University of the Western Cape,South Africa 7. Doro Katalin,PhD in Applied Linguistics,Department of English Language Teacher Education and Applied Linguistics,University of Szeged,Hungary 8. Dutta Hemanga,Assistant Professor of Linguistics,The English and Foreign Languages University (EFLU),India 9. Fernández Miguel,PhD,Chicago State University,USA 10. Grim Frédérique M. A.,Associate Professor of French,Colorado State University,USA Downloaded from mjltm.org at 11:00 +0330 on Tuesday October 5th 2021 [ DOI: 10.26655/mjltm.2018.4.1 ] 11. Izadi Dariush,PhD in Applied Linguistics,Macquarie University,Sydney,Australia Vol. 8, Issue 4, April 2018 Page 2 Modern Journal of Language Teaching Methods ISSN: 2251-6204 12. Kaviani Amir,Assistant Professor at Zayed University,UAE 13. Kirkpatrick Robert,Assistant Professor of Applied Linguistics,Shinawatra International University,Thailand 14.
    [Show full text]
  • Monetary Policy Mistakes and the Evolution of Inflation Expectations
    FEDERAL RESERVE BANK OF SAN FRANCISCO WORKING PAPER SERIES Monetary Policy Mistakes and the Evolution of Inflation Expectations Athanasios Orphanides Central Bank of Cyprus and John C. Williams Federal Reserve Bank of San Francisco May 2011 Working Paper 2010-12 http://www.frbsf.org/publications/economics/papers/2010/wp10-12bk.pdf The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System. Monetary Policy Mistakes and the Evolution of Inflation Expectations Athanasios Orphanides Central Bank of Cyprus and John C. Williams∗ Federal Reserve Bank of San Francisco May 2011 Abstract What monetary policy framework, if adopted by the Federal Reserve, would have avoided the Great Inflation of the 1960s and 1970s? We use counterfactual simulations of an esti- mated model of the U.S. economy to evaluate alternative monetary policy strategies. We show that policies constructed using modern optimal control techniques aimed at stabilizing inflation, economic activity, and interest rates would have succeeded in achieving a high de- gree of economic stability as well as price stability only if the Federal Reserve had possessed excellent information regarding the structure of the economy or if it had acted as if it placed relatively low weight on stabilizing the real economy. Neither condition held true. We doc- ument that policymakers at the time both had an overly optimistic view of the natural rate of unemployment and put a high priority on achieving full employment.
    [Show full text]
  • Application of Okun's Law in the Economy of India During: 2008-2017
    BKGC SCHOLARS January - June 2020, Vol. 1, Issue 1, PP- 95-103 Application of Okun’s Law in The Economy of India During: 2008-2017 Payel Das*1; Rupkatha Mukherjee*2 Department of Economics Bijoy Krishna Girls' College, Howrah 5/3 M.G Road, Howrah-711101, West Bengal, India *1 [email protected]; *2 [email protected] Abstract: Losing job can be the most distressing economic event in person’s life. Most people rely on their labour earnings to maintain their standard of living. A job loss means a lower living standard in the present, anxiety about the future and reduced self- esteem. High unemployment is both an economic and a social problem. Unemployment is an economic problem because it represents waste of a valuable resource. The relationship between economic growth and unemployment has always preoccupied economists and politicians. To get the clear idea about this relationship economist are accustomed to refer “Okun’s Law”. The present paper inspects validity of Okun’s Law in the Indian economy. Further it uses econometrics tools to analyse the annual data of unemployment rate and real GDP growth rate for the period 2008-2017. The presence of statistically significant relation between unemployment rate and output growth rate indicates that unemployment influences real output directly as well as indirectly. I. INTRODUCTION Now a days the world faces with major economic and financial problems, including among others the problem of unemployment and sufficient economic growth. Increasing the army of the unemployed is a very debatable issue everywhere around the world, not excluding even the developed economics.
    [Show full text]