Heterogeneity of Non-linear Growth-unemployment Relationship Across Economic Sectors. Does Gender and Age Matter?

Abstract

The growth-unemployment relationship is widely discussed in scientific literature. However, there is a lack of research analysing the variation of Okun‘s coefficient across economic sectors, especially considering gender and age characteristics. The aim of this article is to investigate the non-linear impact of sectoral output growth on age-and gender-specific unemployment over the business cycle. We apply the first-differenced specification of Okun‘s Law to estimate heterogeneous coefficients across economic sectors: agriculture, manufacturing, services and construction, over the business cycle, also accounting the sector’s size which depends on the share of the sector’s output. The research results indicate varying unemployment sensitivity across the main economic sectors. We have found that unemployment is affected the most by the output changes in the service sector. Measuring the response of gender specific unemployment, we found that the changes in construction sector has more significant impact on male than female. Youth unemployment sensitivity is higher to the output changes in service, industry and construction sectors. Our findings imply that policies targeting specific sectors can be more efficient in reducing unemployment and highlight the importance for fiscal and monetary policymakers to know how sensitive is unemployment rate to output changes of various sectors.