Thresholds for Employment and Unemployment - a Spatial Analysis of German Regional Labour Markets 1992-2000



18

Table 6.2: Okun’s law: estimation and testing results

Non-spatial GLS estimation

Spatial SUR estimation

Coefficient

t-statistic

Coefficient

t-statistic

Output growth

-0.0510

-11.336

-0.0453

-9.032

Constant

0.0020

11.036

0.0010

7.781

D93

0.0996

16.862

0.0157

29.453

D00

-0.0090

-26.983

-0.0055

-18.740

Unempl. threshold

0.0401

10.946

0.0219

6.125

R2     SER

SSR

R2     SER

SSR

0.305     0.010

0.133

0.524     0.008

0.091

Non-spatial GLS
estimation

Spatial SUR estimation

Moran's I residuals
(z value)

Moran's I residuals
(z value)

Significant eigen-
vectors

Moran's I spatial
components

1993

0.180 (4,043)

0.002 (1,278)

2, 4, 7, 12, 14, 16, 21,

22, 27, 33, 36, 37

0.702

1994

0.518 (11,199)

0.043 (2,201)

1, 2, 3, 5, 6, 7, 10, 12,

14

0.965

1995

0.375 (8,081)

0.081 (2,851)

1, 2, 3, 4, 7, 10, 13, 31

0.938

1996

0.321 (6,931)

0.020 (1,374)

1, 2, 3, 9, 10, 16, 17

0.949

1997

0.693 (14,756)

0.061 (3,230)

1, 2, 3, 4, 6, 7, 14, 21,

25, 29, 31, 32, 33, 34,
35, 38, 39

0.891

1998

0.402 (8,645)

0.025 (1,237)

1, 2, 6, 9, 10, 23, 25,
40

0.802

1999

0.236 (5,114)

0.026 (1,878)

6, 8, 10, 13, 14, 16,

17, 26, 27, 28, 33

0.721

2000

0.559 (12,058)

0.024 (2,136)

1, 2, 3, 4, 5, 7, 17, 19,
22, 24, 25, 28, 33, 38

0.939

Notes: Non-spatial GSL estimation is based on the SUR model (3.4) without applying the spatial filtering
approach.
.D93, D00: Dummies for 1993 and 2000, R2: coefficient of determination, SER: stan-
dard error of regression, SSR: sum of squared residuals

Table 6.2 reports the results of the FD specification of Okun’s law. The law is supposed
to hold over the entire sample period. However, although all coefficients are significant
with the expected signs, their magnitude appear to be very low. Due to persistence ef-
fects, unemployment does not react very much in response to a change in the growth
rate.



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