Akaike, H. 1973. “Information Theory and an Extension of the Maximum Likelihood Principle.” In Proceedings of the Second International Symposium on Information Theory, edited by B.N. Petrov and F. Csaki, 267–281. Budapest: Akademiai Kiado.
Akaike, H. 1974. “A New Look at the Statistical Model Identification.” IEEE Transactions on Automatic Control 19 (6): 716–723. [Crossref]
Bai, C., Q. Li, and M. Ouyang. 2012. “Property Taxes and Home Prices: A Tale of Two Cities.” Texas A&M University Working paper.
Bai, J., and S. Ng. 2002. “Determining the Number of Factors in Approximate Factor Models.” Econometrica 70: 191–221. [Crossref]
Ball, L., D. Leigh, and P. Loungani. 2013. “Okuns Law: Fit at 50?” NBER Working Paper 18668, IMF Working Paper 13/10.
Belsley, D. 1984. “Collinearity and Forecasting.” Journal of Forecasting 3 (2): 183–196. [Crossref]
Bunel, M. 2004. “Aides Incitatives et Déterminants des Embauches des établissements Passés à 35 Heures.” Économie et Statistique N°376–377.
Cazes, S., S. Verick, and F. Al-Hussami. 2011. “Diverging Trends in Unemployment in the US and Europe: Evidence from Okun’s law and the Global Financial Crisis.” Employment Working Paper, N°106, International Labor Organization.
Chemin, M., and E. Wasmer. 2009. “Using Alsace-Moselle Local Laws to Build a Difference-in-Differences Estimation Strategy of the Employment Effects of the 35-Hour Workweek Regulation in France.” Journal of Labor Economics 27 (4): 487–524. [Web of Science]
Crépon B., M. Leclair, and S. Roux. 2004. “RTT, Productivité et Emploi: Nouvelles Estimations Sur Données D’entreprises.” Économie et Statistique 376–377.
Estevão, M., and F. Sá. 2008. “The 35-hour Workweek in France: Straightjacket or Welfare Improvement?” Economic Policy 23 (55): 417–463.
Forni, M., and L. Reichlin. 1998. “Let’s Get Real: a Factor-Analytic Approach to Disaggregated Business Cycle Dynamics.” Review of Economic Studies 65: 453–473. [Crossref]
Freeman, D. 2001. “Panel Test of Okun’s Law for Ten Industrial Countries.” Economic Inquiry 39: 511–523. [Crossref]
Gregory, A., and A. Head. 1999. “Fluctuations in Productivity, Investment, and the Current Account.” Journal of Monetary Economics 44: 423–452. [Crossref]
Gubian A., S. Jugnot, F. Lerais, and V. Passeron. 2004. “Les Effets de la RTT Sur L’emploi: Des Simulations ex Ante Aux Évaluations Ex Post.” Économie et Statistique N°376–377.
Hsiao, C., H. Steve Ching, and S. Ki Wan. 2012. “A Panel Data Approach for Program Evaluation: Measuring the Benefits of Political and Economic Integration of Hong Kong with Mainland China.” Journal of Applied Econometrics 27 (5): 705–740. [Crossref] [Web of Science]
Hurvich, C. M., and C.-L. Tsai. 1989. “Regression and Time Series Model Selection in Small Samples.” Biometrika 76 (2): 297–307. [Crossref]
Moosa, Imad A. 1997. “A Cross-Country Comparison of Okun’s Coefficient.” Journal of Comparative Economics 24 (3): 335–356. [Crossref]
Okun, A. M. 1962. “Potential GNP: Its Measurement and Significance.” American Statistical Association, Proceedings of the Business and Economics Section, 98–104.
Prachowny, Martin F. J. 1993. “Okun’s Law: Theoretical Foundations and Revised Estimates.” The Review of Economics and Statistics 75 (2): 331–336. [Crossref]
Sims, C. A. 1980. “Macroeconomics and Reality.” Econometrica 48: 1–48. [Crossref]
About the article
Published Online: 2013-06-19
Published in Print: 2013-01-01
We thank the anonymous referee for pointing out the importance to study both the first-order and second-order effects of RWT.
The main reason that we use unemployment rates rather than employment rates is because quarterly unemployment rate data are available from 1991:Q1 to 2007Q4, while only annual employment data are available from 1983 to 2007, which gives us a smaller sample.
Okun’s Law says there is a negative relationship between unemployment and real output, see e.g., Okun (1962).
Of course there are idiosyncratic factors driving the unemployment and the GDP growth of different countries too, but as long as they are not systematically correlated with the RWT policy in France, our method will still work.
See e.g., the discussion in Hsiao, Steve Ching, and Ki Wan (2012).
This also facilitates our analysis of Okun’s Law, as there is a debate on whether Okun’s Law still holds during the Great Recession, e.g., Cazes, Verick, and Al-Hussami (2011) and Ball, Leigh, and Loungani (2013).
Here we follow the way of Okun (1962) to estimate Okun’s coefficient instead of the method of Prachowny (1993), Freeman (2001) and Moosa (1997), as the latter regresses the GDP growth rate on the change of unemployment rate and needs to control for changes in capital, capacity utilization and hours worked etc.
We got similar results when using data before 1997 as the pre-treatment period. We do not extend the analysis further back, as we want to have more than 20 observations for the data fitting process.