Jacob Morton

Date of Award

2013

Document Type

Thesis

Degree Name

Bachelors

Department

Social Sciences

First Advisor

Khemraj, Tarron

Keywords

Unemployment, Econometrics

Area of Concentration

Economics, Political Science, U.S. State Economies

Abstract

The purpose of this paper is to estimate Okun's law coefficients for all 50 U.S. states over the period 1976-2010. Using the "gap" model and two separate detrending techniques, the Baxter-King and Hodrick-Prescott filters, the results show that Okun's law holds for each of the 50 states and the nation as a whole. Further, the paper cross-examines the ten Okun's coefficients with two labor market variables and one political-ideological variable — (1) "right to work" status as a proxy for unionization rates and the "disposable worker hypothesis," (2) the relative size of states' manufacturing sectors, and (3) the ideological orientation of state governments. The paper's core findings are that Okun's law holds at the state level and that the average state-level Okun's law coefficient is approximately between 2 and 2.5, depending on the detrending technique used. The paper finds weak evidence for inter-regional variation Further, there is only minimal evidence for correlations between Okun's law and a state's right-to-work status or the size of its manufacturing sector relative to its GSP. Finally, there is little evidence that Okun's law is related to the ideological orientation of state governments. The results are broadly consistent with the findings of Donald G. Freeman's regional analysis (2001), but broadly contrast with the 26 state-level tests conducted by Paul R. Blackley (1991).

Rights

The author has granted New College of Florida the nonexclusive right to archive, make accessible, and distribute for educational purposes this work in whole or in part in all forms of media, now or hereafter known. The copyright of this work remains with the author.

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