Economic Analysis Of Unemployment And Its Impact On Gdp

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Economic Analysis of Unemployment and its Impact on GDP in Developed Countries Paul Kuechenmeister Econ 4331W August 3rd, 2014 Introduction This study examines the impact of unemployment rates to a developed economies growth rate. This paper will be built off of the most distinguished idea addressing the relation of economic growth and unemployment, Okun’s Law . Okun’s Law that assesses the relation between unemployment and economic growth is one of linearity . Okun’s Law is the idea that there is a natural level of unemployment and when the level of unemployment is above the natural rate, economic growth suffers. This paper aims prove correlation between the level of unemployment and level of economic growth in developed countries. This dissertation will utilize a linear regression model for a cross-country regression analysis. The type of unemployment used in this dissertation will be aggregate unemployment, while drilling down and separating out structural, frictional and cyclical unemployment would be ideal in running a regression, the data is simply not present for the subset of countries used in this analysis. This study examines 25 developed countries unemployment rate per capita and GDP growth rate per capita from 1991 to 2012. Literature Review Arthur Okun published a paper in 1962 examining the relationship between unemployment rates and economic growth. Okun’s paper focused on the United States post-war due to the spurt of economic growth and
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