Exploring the relationship between economic growth and employment in the Czech Republic and Belgium

Abstract

The paper addresses the issue of employment policy development and implementation in the selected European countries with a similar economic structure and population, namely the Czech Republic and Belgium. The existing approaches used by Ministries of Labour and Social Affairs are based either on drawing subsidies from EU structural funds within the frameworks of various Operational Programmes or direct job creation that is realized as a consequence of GDP growth. The retrospective observation of the development of such macroeconomic indicators as GDP per capita and employment rate in Belgium reminded us the Okun’s law. This encouraged us to verify the inverted version of the latter and conduct a time series analysis with the use of ARIMA model. The conducted calculations revealed the existence of determined relationship between GDP per capita and employment rate, namely with GDP per capita increase by 2% corresponds to an increase in employment by 1%. This relationship applies vice versa as well. The obtained result may be considered as an extension of the classical Okun’s law theoretical framework. The main aim was to explore these relationships and on the basis of comparative analysis between macroeconomic indicators in the Czech Republic and Belgium to suggest recommendations aimed at development of employment policies.