Okun's law

In economics, Okun's law is an empirically observed relationship between unemployment and losses in a country's production. It is named after Arthur Melvin Okun, who first proposed the relationship in 1962.^[1] The "gap version" states that for every 1% increase in the unemployment rate, a country's GDP will be roughly an additional 2% lower than its potential GDP. The "difference version"^[2] describes the relationship between quarterly changes in unemployment and quarterly changes in real GDP. The stability and usefulness of the law has been disputed.^[3]

^ Okun, Arthur M. "Potential GNP: Its Measurement and Significance," American Statistical Association, Proceedings of the Business and Economics Statistics Section 1962. Reprinted with slight changes in Arthur M. Okun, The Political Economy of Prosperity (Washington, D.C.: Brookings Institution, 1970)
^ Knotek, 75
^ Knotek, 93

[1] Okun, Arthur M. "Potential GNP: Its Measurement and Significance," American Statistical Association, Proceedings of the Business and Economics Statistics Section 1962. Reprinted with slight changes in Arthur M. Okun, The Political Economy of Prosperity (Washington, D.C.: Brookings Institution, 1970)

[2] Knotek, 75

[3] Knotek, 93

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